UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________
FORM 10-K
x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2015
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 001-06605
____________________________________
EQUIFAX INC.
(Exact name of registrant as specified in its charter)
Georgia | 58-0401110 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
1550 Peachtree Street, N.W. | ||
Atlanta, Georgia | 30309 | |
(Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: 404-885-8000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Name of each exchange on which registered | |
Common Stock, $1.25 par value per share | New York Stock Exchange | |
Securities registered pursuant to Section 12(g) of the Act: None.
____________________________________
Indicate by check mark if Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Exchange Act (“Act”). x YES ¨ NO
Indicate by check mark if Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨ YES x NO
Indicate by check mark whether Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x YES ¨ NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). YES x NO ¨
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
x Large accelerated filer | ¨ Accelerated filer | ¨ Non-accelerated filer | ¨ Smaller reporting company | |||
(Do not check if a smaller reporting company) | ||||||
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). ¨ YES x NO
As of June 30, 2015, the aggregate market value of Registrant’s common stock held by non-affiliates of Registrant was approximately $11,479,281,498 based on the closing sale price as reported on the New York Stock Exchange. At January 31, 2016, there were 118,706,565 shares of Registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant’s definitive proxy statement for its 2016 annual meeting of shareholders are incorporated by reference in Part III of this Form 10-K.
TABLE OF CONTENTS
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PART I
ITEM 1. BUSINESS
OVERVIEW
Equifax Inc. is a leading global provider of information solutions and human resources business process outsourcing services for businesses, governments and consumers. We have a large and diversified group of clients, including financial institutions, corporations, governments and individuals. Our products and services are based on comprehensive databases of consumer and business information derived from numerous types of credit, financial assets, telecommunications and utility payment, employment, income, public record, demographic and marketing data. We use advanced statistical techniques and proprietary software tools to analyze all available data, creating customized insights, decision-making solutions and processing services for our clients. We help consumers understand, manage and protect their personal information and make more informed financial decisions. We also provide information, technology and services to support debt collections and recovery management. Additionally, we are a leading provider of payroll-related and human resource management business process outsourcing services in the United States of America, or U.S.
We currently operate in three global regions: North America (U.S. and Canada), Europe (the United Kingdom, or U.K., Spain and Portugal) and Latin America (Argentina, Chile, Costa Rica, Ecuador, El Salvador, Honduras, Mexico, Paraguay, Peru and Uruguay). We also maintain support operations in the Republic of Ireland. We offer credit services in Russia and India through joint ventures and have an investment in the second largest consumer and commercial credit information company in Brazil.
Equifax was originally incorporated under the laws of the State of Georgia in 1913, and its predecessor company dates back to 1899. As used herein, the terms Equifax, the Company, we, our and us refer to Equifax Inc., a Georgia corporation, and its consolidated subsidiaries as a combined entity, except where it is clear that the terms mean only Equifax Inc.
We are organized and report our business results in four operating segments, as follows:
• | U.S. Information Solutions (USIS) — provides consumer and commercial information solutions to businesses in the U.S. including online information, decisioning technology solutions, fraud and identity management services, portfolio management services, mortgage reporting and financial marketing services. |
• | International —which includes our Canada, Europe and Latin America business units, provides products and services similar to those available in the USIS operating segment but with variations by geographic region. In Europe and Latin America, we also provide information, technology and services to support debt collections and recovery management. |
• | Workforce Solutions — provides services enabling clients to verify income and employment (Verification Services) as well as to outsource and automate the performance of certain payroll-related and human resources management business processes, including unemployment cost management, tax credits and incentives and I-9 management services and services to allow employers to ensure compliance with the Affordable Care Act (Employer Services). |
• | Personal Solutions — provides products to consumers in the United States, Canada, and the U.K., enabling them to understand and monitor their credit and monitor and help protect their identity. We also sell consumer and credit information to resellers who combine our information with other information to provide direct to consumer monitoring, reports and scores. |
Proposed Acquisition of Veda Group Limited
On November 21, 2015, we entered into a Scheme Implementation Deed (the "Agreement") to acquire Veda Group Limited ("Veda") for cash consideration of approximately $1.7 billion (2.4 billion Australian dollars) and debt assumed of approximately $188.4 million (261.5 million Australian dollars). We expect the transaction to close in the first quarter of 2016 and to finance the cash portion of the purchase price through a combination of cash on hand and new debt, including term loans, the 364-day Revolver, and commercial paper. The terms of the new debt instruments are included in Note 6 to the Consolidated Financial Statements. The Agreement contains customary representations and warranties of the Company and Veda, as well as customary covenants and agreements. The implementation of this binding agreement is subject to customary closing conditions, as well as shareholder and regulatory approvals in Australia and New Zealand, which have been completed.
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Refer to Item 1A "Risk Factors" and Note 16 to the Consolidated Financial Statements for additional information on the proposed acquisition of Veda.
Our revenue base and business mix are diversified among our four segments as depicted in the chart below.
OUR BUSINESS STRATEGY
Our strategic objective is to be the global leader in information solutions that creates unparalleled insights to solve customer challenges. Data is at the core of our value proposition. Leveraging our extensive resources, we deliver differentiated decisions through a broad and diverse set of data assets, sophisticated analytics and proprietary decisioning technology. Our long-term corporate growth strategy is driven by the following imperatives:
• | Deliver consistently strong profitable growth and shareholder returns. We seek to meet or exceed our financial commitments on revenue growth and margins through disciplined execution of our strategic initiatives and by positioning ourselves as a premier provider of high value information solutions. |
• | Develop unparalleled analytical insights leveraging Equifax unique data. We continue to invest in and acquire unique sources of credit and non-credit information to enhance the variety and quality of our services while increasing clients’ confidence in information-based business decisions. Areas of focus for investment in new sources of data include, among others, positive payment data, real estate data and new commercial business data. We also have developed unique capabilities to integrate customer and third-party data into our solution offerings to further enhance the decisioning solutions we develop for our customers. |
We continue to invest in and develop new technology to enhance the functionality, cost-effectiveness and security of the services we offer and further differentiate our products from those offered by our competitors. In addition to custom products for large clients, we develop off-the-shelf, decisioning technology platforms that are more cost effective for medium and smaller-sized clients. We also develop predictive scores and analytics, some of which leverage multiple data assets, to help clients acquire new customers and manage their existing customer relationships. We develop a broad array of industry, risk management, cross-sell and account acquisition models to enhance the precision of our clients’ decisioning activities. We also develop custom and generic solutions that enable customers to more effectively manage their debt collection and recovery portfolios.
• | Innovate for market leadership in key domains and verticals. We seek to increase our share of clients’ spend on information-related services through developing and introducing new products, pricing our services in |
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accordance with the value they represent to our customers, increasing the range of current services utilized by our clients, and improving the quality and effectiveness of our sales organization and client support interactions with consumers. We are also helping clients address increased requirements to comply with emerging regulations and rules.
We believe there are many opportunities to expand into emerging markets both in the U.S. and internationally. In the U.S., we have increased and broadened resources in key markets, including mortgage, auto, insurance, telecommunications, and government, and we are delivering services ranging from identity authentication to risk management. We continue to invest in growing our ventures in Russia and India and leveraging our newer product offerings across all of our geographical business units and periodically enter new country markets through acquisitions or start-up operations.
• | Serve as a trusted steward and advocate for our customers and consumers. This includes continuously improving the customer and consumer experience in our consumer and commercial offerings, anticipating and executing on regulatory initiatives, while simultaneously delivering security for our services. |
• | Invest in talent to drive our strategy and foster a culture of innovation. We attract top talent by continuing to expand and diversify our talent pipeline. We regularly undertake various talent initiatives to engage, develop, and retain our top talent. |
MARKETS AND CLIENTS
Our products and services serve clients across a wide range of verticals, including financial services, mortgage, human resources, consumer, commercial, telecommunications, retail, automotive, utilities, brokerage, healthcare and insurance industries, as well as state and federal governments. We also serve consumers directly. Our revenue stream is highly diversified with our largest client providing only 3% of total revenue. The following table summarizes the various end-user markets we serve:
(1) | Predominantly sold to companies who serve the direct to consumer market and includes other small end user markets. |
(2) | Other includes revenue from marketing services, insurance, healthcare and other miscellaneous end user markets. |
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We market our products and services primarily through our own direct sales organization that is organized around sales teams that focus on client segments typically aligned by vertical markets and geography. Sales groups are based in our headquarters in Atlanta, Georgia, and field offices located in the U.S. and in the countries where we have operations. We also market our products and services through indirect channels, including alliance partners, joint ventures and other resellers. In addition, we sell through direct mail and various websites, such as www.equifax.com.
Our largest geographic market segments are the U.S.; Canada; Europe (the U.K., Spain and Portugal); and Latin America (Argentina, Chile, Costa Rica, Ecuador, El Salvador, Honduras, Mexico, Paraguay, Peru and Uruguay). We also maintain support operations in the Republic of Ireland. We offer consumer credit services in Russia and India through joint ventures and have an investment in the second largest consumer and commercial credit information company in Brazil. We also provide information, technology and services to support debt collections and recovery management in Europe and Latin America.
Revenue from international clients, including end users and resellers, amounted to 23% of our total revenue in 2015, 26% of our total revenue in 2014 and 23% of our total revenue in 2013.
PRODUCTS AND SERVICES
Our products and services help our clients make better decisions with higher levels of confidence by leveraging a broad array of data assets. Analytics are used to derive insights from the data that are most relevant for the client’s decisioning needs. The data and insights are then processed through proprietary software and transmitted to the client’s operating system to execute the decision.
The following chart summarizes the key products and services offered by each of the business units within our segments:
USIS | International | Workforce Solutions | ||||||||||||||||
Online Information Solutions | Financial Marketing Services | Mortgage Services | Canada | Europe | Latin America | Verification Services | Employer Services | Personal Solutions | ||||||||||
Online data | X | X | X | X | X | X | X | |||||||||||
Portfolio management services | X | X | X | X | X | X | X | |||||||||||
Analytical services | X | X | X | X | X | X | X | X | X | |||||||||
Technology services | X | X | X | X | X | |||||||||||||
Identity management and fraud | X | X | X | X | X | X | ||||||||||||
Marketing Services | X | X | X | X | ||||||||||||||
Direct to consumer credit monitoring | X | |||||||||||||||||
Employment and income verification services | X | |||||||||||||||||
Business process outsourcing (BPO) | X | X | ||||||||||||||||
Debt collection software, services and analytics | X | X | X | X | ||||||||||||||
Each of our operating segments is described more fully below.
USIS
USIS provides consumer and commercial information solutions to businesses in the U.S. through three product and service lines, as follows:
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Online Information Solutions. Online Information Solutions’ products are derived from multiple large and comprehensive databases of consumer and commercial information that we maintain about individual consumers and businesses, including credit history, current credit status, payment history and address information. Our clients utilize the information and analytical insights we provide to make decisions for a broad range of financial and business purposes, such as whether, and on what terms, to approve auto loans or credit card applications, and whether to allow a consumer or a business to open a new utility or telephone account. In addition, this information is used by our clients for cross selling additional products to existing customers, improving their underwriting and risk management decisions, and authenticating and verifying consumer and business identities. We also sell consumer and credit information to resellers who combine our information with other information to provide services to the mortgage, fraud and identity management, and other end-user markets. Our software platforms and analytical capabilities can integrate all types of information, including third-party and client information, to enhance the insights and decisioning process to help further mitigate the risk of granting credit, predict the risk of bankruptcy, indicate the applicant’s risk potential for account delinquency, ensure the identity of the consumer, and reduce exposure to fraud. These risk management services enable our clients to monitor risks and opportunities and proactively manage their portfolios.
Online Information Solutions’ clients access products through a full range of electronic distribution mechanisms, including direct real-time access, which facilitates instant decisions. We also develop and host customized applications that enhance the decision-making process for our clients. These decisioning technology applications assist with a wide variety of decisioning activities, including determining pre-approved offers, cross-selling of various products, determining deposit amounts for telephone and utility companies, and verifying the identity of their customers. We have also compiled commercial databases regarding businesses in the U.S., which include loan, credit card, public records and leasing history data, trade accounts receivable performance, and Secretary of State and Securities and Exchange Commission registration information. We offer scoring and analytical services that provide additional information to help mitigate the credit risk assumed by our clients.
Mortgage Solutions. Our Mortgage Solutions products, offered in the U.S., consist of specialized credit reports that combine information from the three major consumer credit reporting agencies (Equifax, Experian Group and TransUnion LLC) into a single “merged” credit report in an online format, commonly referred to as a tri-merge report. Mortgage lenders use these tri-merge reports in making their mortgage underwriting decisions. Additionally, we offer various “triggering” services designed to alert lenders to changes in a consumer’s credit status during the underwriting period and securitized portfolio risk assessment services for evaluating inherent portfolio risk.
Financial Marketing Services. Our Financial Marketing Services products utilize consumer and commercial financial information enabling our clients to more effectively manage their marketing efforts, including targeting and segmentation; to identify and acquire new clients for their products and services; to develop portfolio strategies to minimize risk and maximize profitability; and to realize additional revenue from existing customers through more effective cross selling and upselling of additional products and services. These products utilize information derived from consumer and commercial information, including credit, income, asset, liquidity, net worth and spending activity, which also support many of our Online Information Solutions’ products. These data assets broaden the understanding of consumer and business financial potential and opportunity which can further drive high value decisioning and targeting solutions for our clients. We also provide account review services, which assist our clients in managing their existing customers and prescreen services that help our clients identify new opportunities with their customers. Clients for these products primarily include institutions in the banking, brokerage, retail, insurance and mortgage industries as well as companies primarily focused on digital and interactive marketing.
International
The International operating segment includes our Canada, Europe and Latin America business units. These business units offer products that are similar to those available in the USIS operating segment, although, in some jurisdictions, data sources tend to rely more heavily on government agencies than in the U.S. We also offer specialized services that help our customers better manage risk in their consumer portfolios. This operating segment’s products and services generate revenue in Argentina, Canada, Chile, Costa Rica, Ecuador, El Salvador, Honduras, Mexico, Paraguay, Peru, Portugal, Spain, the U.K. and Uruguay. We also maintain support operations in the Republic of Ireland, Chile and Costa Rica. We offer consumer credit services in Russia and India through our investment in joint ventures and have an investment in the second largest consumer and commercial credit information company in Brazil. We also provide information, technology and services to support debt collections and recovery management in Europe, Canada and Latin America.
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Canada. Similar to Online Information Solutions, Mortgage Solutions and Financial Marketing Services business units, Canada offers products derived from the credit information that we maintain about individual consumers and businesses. We offer many products in Canada, including credit reporting and scoring, consumer and commercial marketing, risk management, fraud detection and modeling services, identity management and authentication services, together with certain of our decisioning products that facilitate pre-approved offers of credit and automate a variety of credit decisions.
Europe. Our European operation provides information solutions, marketing and personal solutions products. Information solutions and personal solutions products are generated from information that we maintain and include credit reporting and scoring, asset information, risk management, identity management and authentication services, fraud detection and modeling services. Most of these products are sold in the U.K. with a more limited set of information solutions products sold in Portugal and Spain. Our commercial products, such as business credit reporting and commercial risk management services, are available mostly in the U.K, with a more limited set of information solutions products sold in Portugal and Spain. Marketing products, which are similar to those offered in our Financial Marketing Services business unit, are primarily available in the U.K. and, to a lesser extent, in Spain. Beginning in 2014, we also provide information, technology and services to support debt collections and recovery management.
Latin America. Our Latin American operation provides consumer and commercial information solutions products, marketing products and personal solutions products. We offer a full range of products, generated from credit records that we maintain, including credit reporting and scoring, decisioning technology, risk management, identity management, authentication and fraud detection services. Our consumer products are the primary source of revenue in each of the countries in which we operate. We also offer various commercial products, which include credit reporting, decisioning tools and risk management services, in the countries we serve. Beginning in 2013, we also provide information, technology and services to support debt collections and recovery management. Additionally, we provide a variety of consumer and commercial marketing products generated from our credit information databases, including business profile analysis, business prospect lists and database management. The countries in which we operate include Argentina, Chile, Costa Rica, Ecuador, El Salvador, Honduras, Mexico, Paraguay, Peru and Uruguay.
Workforce Solutions
Workforce Solutions operates in the U.S. through two business units:
Verification Services. Verification Services include employment, income and social security number verification services. Our online verification services enable direct third-party verifiers including various governmental agencies, mortgage originators, credit card and automotive lenders and pre-employment screeners to verify the employee’s employment status and income information. We also offer an offline research verification service, which expands employment verification to locate data outside our existing automated database.
The Work Number is our key repository of employment and income data serving our verifier business and enabling employer human resource services. We rely on payroll data received from over 5,300 organizations, including almost three quarters of Fortune 500 companies, to regularly update the database. The updates occur as employers transmit data electronically to Equifax from their payroll systems. Employers contract to provide this data for specified periods under the terms of contracts which range from one to five years. We use this data to provide automated employment and income verification services to third-party verifiers as well as enabling employer services such as unemployment claims, I-9 and eVerify transactions and employer tax credits opportunities.
The fees we charge for these services are generally on a per transaction basis. After the expiration of the applicable contract, absent renewal by mutual agreement of the parties, we generally do not have any further right to use the employment data we obtained pursuant to the contract. We have not experienced significant turnover in the employer contributors to the database because we generally do not charge them to add their employment data to the database and the verification service we offer relieves them of the administrative burden and expense of responding to third-party employment verification requests. The database contained approximately 277 million current and historic employment records at December 31, 2015.
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Employer Services. These services are aimed at reducing the cost to the human resources function of businesses through a broad suite of services including assisting with employment tax matters designed to reduce the cost of unemployment claims through effective claims representation and management and efficient processing and to better manage the tax rate that employers are assessed for unemployment taxes; comprehensive services designed to research the availability of employment-related tax credits (e.g., the federal work opportunity and welfare to work tax credits and state tax credits), and to process the necessary filings and assist the client in obtaining the tax credit; W-2 management services (which include initial distribution, reissue and correction of W-2 forms); paperless pay services that enable employees to electronically receive pay statement information as well as review and change direct deposit account or W-4 information; integrated electronic time capture and reporting services; paperless new-hire services to bring new workers on board using electronic forms; I-9 management services designed to help clients electronically comply with the immigration laws that require employers to complete an I-9 form for each new hire; and onboarding services using online forms to complete the new hire process for employees of corporate and government agencies. We also offer analytical services enabling our customers to better understand the demographic profile and key statistical metrics of their workforce. In addition we provide software and services to employers to assist in compliance with the Affordable Care Act ("ACA") through partnerships with government agencies.
Personal Solutions
Our Personal Solutions products give consumers information to enable them to understand and monitor their credit and monitor and help protect their identity primarily through our Equifax Complete, ID Patrol, Credit Watch and Score Watch monitoring products. Consumers can obtain credit file information about them and Equifax or FICO credit scores. Equifax products also offer monitoring features for consumers who are concerned about identity theft and data breaches, including credit report monitoring from all three bureaus, internet and bank account monitoring, lost wallet support, and the ability to lock and unlock the Equifax credit file. Our products are available to consumers in the United States, Canada, and the U.K. directly primarily over the internet and indirectly through relationships with business partners who distribute our products or provide these services to their employees or customers. We also sell consumer and credit information to resellers who combine our information with other information to provide direct to consumer monitoring, reports and scores.
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COMPETITION
The market for our products and services is highly competitive and is subject to constant change. Our competitors vary widely in size and the nature of the products and services they offer. Sources of competition are numerous and include the following:
• | Competition for our consumer credit information solutions and personal solutions products varies by both application and industry, but generally includes two global consumer credit reporting companies, Experian and TransUnion, both of which offer a product suite similar to our credit reporting solutions, and LifeLock, a national provider of personal identity theft protection products, as well as emerging competitors offering free credit scores including Credit Karma. There are also a large number of competitors who offer competing products in specialized areas (such as fraud prevention, risk management and application processing and decisioning solutions) and software companies offering credit modeling services or analytical tools. As a premier provider of information based insights and solutions, we believe that our products offer clients an advantage over those of our credit based competitors because of the depth and breadth of our consumer information files, which we believe to be superior in terms of accuracy, coverage and availability. Other differentiators include our decisioning technology and the features and functionality of our analytical capabilities. Our competitive strategy is to emphasize improved decision making and product quality while remaining competitive on price. Our marketing services products also compete with the foregoing companies and others who offer demographic information products, including Acxiom, Harte-Hanks and infoGROUP. We also compete with Fair Isaac Corporation with respect to certain of our analytical tools and solutions. |
• | Competition for our commercial solutions products primarily includes Experian, The Dun & Bradstreet and Cortera, and providers of these services in the international markets we serve. We believe our access to and knowledge of U.S. small business loan information from financial institutions combined with our consumer credit information in the case of small business owners enables more efficient and effective decision-making for the small business segment of that market. |
• | Competition for our employment and income verification services includes large employers who serve their own needs through in-house systems to manage verification as well as regional online verification companies, such as Verify Jobs and First Advantage, who offer verification services along with other human resources and tax services. Competition in the Employer Services market is diverse and includes in-house management of such services or the outsourcing of one or more of such services to HR consulting firms such as Mercer and Towers Watson, HR management services providers such as Oracle and Silk Road, payroll processors such as ADP and Ceridian, accounting firms such as PricewaterhouseCoopers and Ernst & Young, analytics companies such as Tableau and Visier and hundreds of smaller companies that provide one or multiple offerings that compete with our Employer Services business. Competition in the Verification Services market includes employers who manage verifications in-house, lenders who obtain verifications directly from employers, and online and offline verification companies, such as Verify Job System, Corporate Cost Control, Thomas & Thorngren and Employers Edge. |
• | Competition for our debt collection and recovery management software, services and analytics is similar to the competition for our consumer credit information solutions. We believe that the breadth and depth of our data assets enable our clients to develop a more current and comprehensive view of consumers. In the category of platforms and analytics, we compete to some extent with entities that deploy collections platforms, account management systems or recovery solutions. |
While we believe that none of our competitors offers the same mix of products and services as we do, certain competitors may have a larger share of particular geographic or product markets or operate in geographic areas where we do not currently have a presence.
We assess the principal competitive factors affecting our markets to include: product attributes such as quality, depth, coverage, adaptability, scalability, interoperability, functionality and ease of use; product price; technical performance; access to unique proprietary databases; availability in application service provider, or ASP, format; quickness of response, flexibility and client services and support; effectiveness of sales and marketing efforts; existing market penetration; new product innovation; and our reputation as a trusted steward of information.
TECHNOLOGY AND INTELLECTUAL PROPERTY
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We generally seek protection under federal, state and foreign laws for strategic or financially important intellectual property developed in connection with our business. Certain intellectual property, where appropriate, is protected by registration under applicable trademark laws or by prosecution of patent applications. We own a number of patents registered in the U.S. and several in foreign countries. We also have certain registered trademarks, service marks, logos and internet domain names in the U.S. and in many foreign countries, the most important of which are “Equifax,” “Decision360,” “The Work Number” and variations thereof. These marks are used in connection with many of our product lines and services. We believe that, in the aggregate, the rights under our patents and trademarks are generally important to our operations and competitive position, but we do not regard any of our businesses as being dependent upon any single patent or group of patents or trademark. However, certain Company trademarks, which contribute to our identity and the recognition of our products and services, including but not limited to the “Equifax” trademark, are an integral part of our business, and their loss could have a material adverse effect on us. We also protect certain of our confidential intellectual property and technology in compliance with trade secret laws and through the use of nondisclosure agreements.
We license other companies to use certain data, software, and other technology and intellectual property rights we own or control, primarily as core components of our products and services, on terms that are consistent with customary industry standards and that are designed to protect our interest in our intellectual property. Other companies license us to use certain data, technology and other intellectual property rights they own or control. For example, we license credit-scoring algorithms and the right to sell credit scores derived from those algorithms from third parties for a fee. We do not hold any franchises or concessions that are material to our business or results of operations.
GOVERNMENTAL REGULATION
We are subject to a number of U.S. federal, state, local and foreign laws and regulations that involve matters central to our business. These laws and regulations may involve privacy, data protection, intellectual property, competition, consumer protection, anti-corruption, anti-bribery, anti-money laundering, employment, health, taxation or other subjects. In particular, we are subject to federal, state and foreign laws regarding the collection, protection, dissemination and use of non-public personal information we have in our possession and to consumer financial protection. Foreign data and consumer protection, privacy and other laws and regulations are often more restrictive than those in the U.S. Failure to satisfy those legal and regulatory requirements, or the adoption of new laws or regulations, could have a material adverse effect on our results of operations, financial condition or liquidity.
U.S. federal and state and foreign laws and regulations are evolving and can be subject to significant change. In addition, the application and interpretation of these laws and regulations are often uncertain. These laws are enforced by federal, state and local regulatory agencies in the jurisdictions where we operate, and in some instances also through private civil litigation. There are also a number of legislative proposals pending before the U.S. Congress, various state legislative bodies, and foreign governments concerning consumer and data protection which could affect us.
Summary of U.S. Regulation Relating to Consumer and Data Protection
Our U.S. operations are subject to numerous laws and regulations governing the collection, protection and use of consumer credit and other information, and imposing sanctions for the misuse of such information or unauthorized access to data. Many of these provisions also affect our customers’ use of consumer credit or other data we furnish.
Examples of the most significant of these laws include, but are not limited to, the following:
Federal Laws and Regulation
• | FCRA - The United States Fair Credit Reporting Act (“FCRA”) regulates consumer reporting agencies, including us, as well as data furnishers and users of consumer reports such as banks and other companies. FCRA provisions govern the accuracy, fairness and privacy of information in the files of consumer reporting agencies (“CRAs”) that engage in the practice of assembling or evaluating certain information relating to consumers for certain specified purposes. The FCRA limits the type of information that may be reported by CRAs, limits the distribution and use of consumer reports and establishes consumer rights to access and dispute their credit files. CRAs are required to follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates and if a consumer disputes the accuracy of any information in the consumer’s file, to conduct a reasonable reinvestigation. CRAs are required to make available to consumers a free annual credit report. The FCRA imposes many other requirements on CRAs, data furnishers and users of consumer report information. Violation of the FCRA can result in civil and criminal penalties. The |
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FCRA contains an attorney fee shifting provision to provide an incentive for consumers to bring individual or class action lawsuits against a CRA for violations of the FCRA. Regulatory enforcement of the FCRA is under the purview of the United States Federal Trade Commission (“FTC”), the Consumer Financial Protection Bureau (“CFPB”), and state attorneys general, acting alone or in concert with one another.
• | The Dodd-Frank Act - One of the purposes of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) is to protect consumers from abusive financial services practices. Title X of the Dodd-Frank Act created the CFPB. The Dodd-Frank Act transfers authority under certain existing laws to the CFPB and provides it with examination and supervisory authority. The Dodd-Frank Act also prohibits unfair, deceptive or abusive acts or practices (“UDAAP”) with respect to consumer finance and provides the CFPB with authority to enforce those provisions. We are subject to the examination and supervision of the CFPB. The CFPB may pursue administrative proceedings or litigation to enforce the laws and rules subject to its jurisdiction. In these proceedings the CFPB can obtain cease and desist orders, which can include orders for restitution to consumers or rescission of contracts, as well as other types of affirmative relief, and monetary penalties ranging from $5,000 per day for ordinary violations and up to $1 million per day for knowing violations. Also, the Dodd-Frank Act empowers state attorneys general and state regulators to bring civil actions in certain circumstances for the kind of cease and desist orders available to the CFPB (but not for civil penalties). |
• | FTC Act - The Federal Trade Commission Act (“FTC Act”) prohibits unfair methods of competition and unfair or deceptive acts or practices. We must comply with the FTC Act when we market our services, such as consumer credit monitoring services offered through our Personal Solutions unit. The security measures we employ to safeguard the personal data of consumers could also be subject to the FTC Act, and failure to safeguard data adequately may subject us to regulatory scrutiny or enforcement action. There is no private right of action under the FTC Act. |
• | GLBA - The Financial Services Modernization Act of 1999, or Gramm-Leach-Bliley Act (“GLBA”) regulates, among other things, the use of non-public personal information of consumers that is held by financial institutions, including us. We are subject to various GLBA provisions, including rules relating to the use or disclosure of the underlying data and rules relating to the physical, administrative and technological protection of non-public personal financial information. Breach of the GLBA can result in civil and/or criminal liability and sanctions by regulatory authorities, such as fines of up to $100,000 per violation and up to five years’ imprisonment for individuals. Regulatory enforcement of the GLBA is under the purview of the FTC, the federal prudential banking regulators, the SEC and state attorneys general, acting alone or in concert with each other. |
• | CROA-The Credit Repair Organizations Act (“CROA”) regulates companies that claim to be able to assist consumers in improving their credit standing. There have been efforts to apply the CROA to credit monitoring services offered by consumer reporting agencies and others. CROA allows for a private right of action and permits consumers to recover all money paid for alleged “credit repair” in the event of a violation. |
State Laws and Regulation Relating to Consumer and Data Protection
• | A number of states have enacted requirements similar to the federal FCRA. Some of these state laws impose additional, or more stringent, requirements than the FCRA, especially in connection with the investigations and responses to reported inaccuracies in consumer reports. The FCRA preempts some of these state laws, but the scope of preemption continues to be defined by the courts. The state of Vermont is grandfathered under the original FCRA requirements and thus we are subject to additional requirements to comply with Vermont law. |
• | Most states and the District of Columbia have passed laws that give consumers the right to place a security freeze on their credit reports to prevent others from opening new accounts or obtaining new credit in their name. These laws place differing requirements on credit reporting agencies with respect to how and when to respond to such credit file freeze requests and in the fees, if any, the agencies may charge for freeze-related actions. |
• | A majority of states have adopted versions of data security breach laws that require notification of affected consumers in the event of a breach of personal information. Some of these laws require additional data protection measures which exceed the GLB Act data safeguarding requirements. If data within our system is compromised by a breach, we may be subject to provisions of various state security breach laws. |
• | We are also subject to federal and state laws that are generally applicable to any U.S. business with national or international operations, such as antitrust laws, the Foreign Corrupt Practices Act, the Americans with Disabilities |
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Act, state unfair or deceptive practices act and various employment laws. We continuously monitor federal and state legislative and regulatory activities that involve credit reporting, data privacy and security to identify issues in order to remain in compliance with all applicable laws and regulations.
Summary of International Regulation Relating to Consumer and Data Protection
We are subject to various data protection, privacy and consumer credit laws and regulations in the foreign countries where we operate. Examples of the most significant of these laws include, but are not limited to, the following:
• | In the U.K., we are subject to a regulatory framework which provides for primary regulation by the Financial Conduct Authority (the “FCA”). The FCA focuses on consumer protection and market regulation as well as prudential supervision of regulated financial institutions. The FCA has significant powers, including the power to regulate conduct related to the marketing of financial products, specify minimum standards and to place requirements on products, impose unlimited fines, and to investigate organizations and individuals. In addition, the FCA is able to ban financial products for up to a year while considering an indefinite ban; it has the power to instruct firms to immediately retract or modify promotions which it finds to be misleading, and to publish such decisions. Our core credit reporting (“credit reference”) and debt collections services and recovery management businesses in the U.K. are subject to FCA supervision and we will require certain corporate and “approved person” authorizations from the FCA to carry on such businesses. The FCA has fixed the dates by which credit reference agencies and collection businesses must apply for this authorization: debt collections services businesses were required to apply by June 30, 2015, and credit reference agencies must apply by March 31, 2016. The license application for our collection business (TDX Group or "TDX") was submitted prior to the June 30, 2015 deadline, and we expect to apply for authorization in our capacity as a credit reference agency by the March 31, 2016 deadline. Although we do not currently anticipate any issues in receiving authorization, to the extent applicable approvals are not obtained in a timely manner, or at all, we may not conduct these businesses in the U.K. |
• | In Europe, we are subject to the European Union (“EU”) data protection regulations, including the comprehensive 1995 European Union Data Protection Directive. The EU regulations establish several obligations that organizations must follow with respect to use of personal data, including a prohibition on the transfer of personal information from the EU to other countries whose laws do not protect personal data to an “adequate” level of privacy or security. The EU standard for adequacy is generally stricter and more comprehensive than that of the U.S. and most other countries where Equifax operates. In the U.K., in addition to the EU Directive on Data Protection, the Data Protection Act of 1998 regulates the manner in which we can use third-party data. In addition, regulatory limitations affect our use of the Electoral Roll, one of our key data sources in the U.K. Generally, the data underlying the products offered by our U.K. Information Services and Personal Solutions product lines, excluding our Commercial Services products, are subject to these regulations. In Spain and Portugal, the privacy laws which are subject to the EU Directive on Data Protection regulate all credit bureau and personal solutions activities. Regulation relating to the 1995 EU Data Protection Directive, proposed in 2012 by the European Commission, has now been agreed by the European legislative bodies, that amongst other things, will tighten data protection requirements and make enforcement more rigorous, for example, by streamlining enforcement at a European level, introducing data breach notification requirements and increasing penalties for non-compliance. It is anticipated that the regulation will be enacted in the spring of 2016, and will have a two year implementation period. |
• | In Canada, federal and provincial laws govern how we collect, use or disclose personal information in the course of our commercial activities. The federal Personal Information Protection and Electronic Documents Act of 2000 gives individuals the right to access and request correction of their personal information collected by us, and requires compliance with the Canadian Standard Association Model Code for the Protection of Personal Information covering accountability and identifying purposes, consent, collection, use, disclosure, retention, accuracy, safeguards, individual access and compliance. The federal and provincial privacy regulators have powers of investigation and intervention, and provisions of Canadian law regarding civil liability apply in the event of unlawful processing which is prejudicial to the persons concerned. The European Union, or EU, recognizes Canada as having adequate levels of protection for personal data transfers and processing. |
• | In Latin America, consumer reporting, data protection and privacy laws and regulations exist in various forms in Argentina, Chile, Costa Rica, Ecuador, El Salvador, Paraguay, Peru and Uruguay. Argentina and Uruguay generally follow the EU data protection model, and the EU recognizes both countries’ laws as providing adequate |
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levels of protection for personal data transfers and processing. Data, credit bureau and/or consumer protection laws in Paraguay and Peru regulate issues such as consent, collection, use, disclosure, retention, and accuracy of credit data. Among other protections, laws in all of these countries generally allow individuals to access and request corrections of personal data.
Laws in Argentina, Chile, Ecuador, Paraguay, Peru and Uruguay also establish specific privacy rights, and judicial proceedings may be used to enforce them. Legislation has been proposed in several countries in Latin America that would amend existing credit reporting laws by prohibiting the use of certain data for credit reference purposes, shorten the period during which data may be stored and create new access and notification rights for data subjects. In Argentina, a privacy bill of law was also filed at the Congress of Buenos Aires Province. This bill proposes the creation of a Provincial Registry of databases, stricter regulations concerning notifications to data subjects, and immediate updates of their credit files. The Chilean government has indicated that it will introduce a new comprehensive data protection bill in 2016, and a separate bill that would create a publicly-managed consumer credit registry remains before the legislature. Each of these bills would introduce a new framework to allow the government to regulate the collection and use of personal data, including credit data. Ecuador’s National Assembly approved a law to replace private sector credit bureaus with a state-run registry which when implemented would materially impact our local credit reporting operations in Ecuador. Ecuador, however, represented less than one percent of our 2015 revenue and operating profit for our International business unit and is not material to our consolidated results of operations. The law originally provided a transition period throughout 2013 for the development and introduction of the new registry; however, the transition period was then extended through 2014. In late 2014, the law was amended again to remove the fixed deadline, allowing private sector credit bureaus to continue operating until the financial sector regulatory board determines that the new registry is operational. To date, the public body in Ecuador in charge of the registry has not achieved a successful implementation. In Paraguay, in December 2015 a modification was introduced to current data protection law requiring debts to be eliminated from a credit file once full payment has occurred. In addition, the amendment now permits the disclosure and use of positive data. In Peru there is a proposal to include certain thresholds under which delinquencies could not be reported and the obligation to send a notice prior to the registration of delinquencies. Legislation has been approved in El Salvador to reduce the period of time during which credit information may be reported following the payment of a debt. In addition, to use, share, transfer or commercialize credit data without consent in El Salvador is now a serious infraction, and in the event that a credit bureau suspends or ceases operations, a copy of its credit database must be provided to the regulator. Costa Rica is in the process of amending current administrative regulations regarding data protection. While the potential impact of the foregoing regulatory changes is unlikely to be material in the aggregate to the results of our International operations, if the market opportunity were to be restricted significantly in Argentina or Chile, and/or in a combination of the smaller Latin American countries in which we operate, the impact on our International operating results could be material.
• | In India, various legislation including the Information Technology Act 2000 and the Credit Information Companies (Regulation) Act of 2005 establishes a federal data protection framework. Entities that collect and maintain personal data and/or credit information must ensure that it is complete, accurate and safeguarded, and must adopt certain privacy principles with respect to collecting, processing, preserving, sharing and using such data and/or credit information. The Indian parliament has passed legislation that would allow individuals to sue for damages in the case of a data breach, if the entity negligently failed to implement reasonable security practices and procedures to protect personal data and/or credit information. Our Indian joint venture is subject to regulation by the Reserve Bank of India, which is India’s central banking institution. |
• | In Russia, credit reporting activities are governed by the Federal Law on Credit Histories No.218-fz, dated December 30, 2004. The law regulates the contents of credit files, who may submit data to a credit bureau and who can receive credit reports. |
Tax Management Services
The Tax Management Services business within our Workforce Solutions segment is potentially impacted by changes in renewal or non-renewal of U.S. tax laws or interpretations, for example, those pertaining to work opportunity tax credits and unemployment compensation claims.
PERSONNEL
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Equifax employed approximately 8,000 employees in 21 countries as of December 31, 2015. None of our U.S. employees are subject to a collective bargaining agreement and no work stoppages have been experienced. Pursuant to local laws, certain of our employees in Argentina and Spain are covered under government-mandated collective bargaining regulations that govern general salary and compensation matters, basic benefits and hours of work. In some of our non-U.S. subsidiaries, certain of our employees are represented by workers’ councils or statutory labor unions.
EXECUTIVE OFFICERS OF EQUIFAX
The executive officers of Equifax and their ages and titles are set forth below.
Richard F. Smith (56) has been Chairman and Chief Executive Officer since December 2005. He was named Chairman-Elect and Chief Executive Officer effective September 2005. Prior to that, Mr. Smith served as Chief Operating Officer, GE Insurance Solutions, from 2004 to September 2005 and President and Chief Executive Officer of GE Property and Casualty Reinsurance from 2003 to 2004.
John W. Gamble, Jr. (53) has been Corporate Vice President and Chief Financial Officer since May 2014. Prior to that, Mr. Gamble was Executive Vice President and Chief Financial Officer of Lexmark International, Inc., a global provider of document solutions, enterprise content management software and services, printers and multifunction printers, from September 2005 until May 2014.
John J. Kelley III (55) has been Corporate Vice President and Chief Legal Officer since January 2013. Responsibilities include legal services, global sourcing, security and compliance, government and legislative relations, corporate governance and privacy functions. Mr. Kelley was a senior partner in the Corporate Practice Group of the law firm of King & Spalding LLP from January 1993 to December 2012.
Joseph M. Loughran, III (48) has been Chief Marketing Officer since March 2015. Prior thereto, he served as President, Personal Solutions since January 4, 2010. Prior thereto, he was Senior Vice President - Corporate Development from April 2006 to December 2009. Prior to joining Equifax, he held various executive roles at BellSouth Corporation from May 2001 to April 2006, including most recently Managing Director-Corporate Strategy and Planning from May 2005 to April 2006.
Coretha M. Rushing (59) has been Corporate Vice President and Chief Human Resources Officer since 2006. Prior to joining Equifax, she served as an executive coach and HR Consultant with Atlanta-based Cameron Wesley LLC. Prior thereto, she was Senior Vice President of Human Resources at The Coca-Cola Company, where she was employed from 1996 until 2004.
David C. Webb (60) became Chief Information Officer in January 2010. Prior thereto, he served as Chief Operations Officer for SVB Financial Corp. from 2008, and from 2004 to 2008 was Chief Information Officer. Mr. Webb was Vice President, Investment Banking Division at Goldman Sachs, a leading global investment banking, securities and investment management firm, from 1999 to 2004. He was Chief Information Officer at Bank One from 1997 to 1999.
Rodolfo O. Ploder (55) has been President, Workforce Solutions, since November 2015. Prior thereto, he served as President, U.S. Information Solutions, since April 2010. Prior thereto, he served as President, International, from January 2007 to April 2010. Prior thereto, he was Group Executive, Latin America from February 2004 to January 2007.
Paulino R. Barros (59) has been President, U.S. Information Solutions, since November 2015. Prior thereto, he served as President, International, since July 2010. Prior thereto, he served as President of PB&C Global Investments, LLC, an international consulting and investment firm. Prior thereto, he was President of Global Operations for AT&T.
John T. Hartman (56) has been President, International, since November 2015. Prior thereto, he served as Senior Vice President, Corporate Development, since July 2010. Prior thereto, he served as President of Growth Vector from 2009 to 2010. Prior thereto, he served as Executive Vice President and Chief Commercial Officer for Acuity Brands from 2004 to 2009.
J. Dann Adams (58) has been President, Personal Solutions, since November 2015. Prior thereto, he served as President, Workforce Solutions, since July 2010. Prior thereto, he served as President, U.S. Information Solutions from 2007 to June 2010. Prior thereto, he served as Group Executive, North America Information Services from November 2003 until December 2006.
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Nuala M. King (62) has been Senior Vice President and Controller since May 2006. Prior thereto, she was Vice President and Corporate Controller from March 2004 to April 2006. Prior to joining Equifax, Ms. King served as Corporate Controller for UPS Capital from March 2001 until March 2004.
FORWARD-LOOKING STATEMENTS
This report contains information that may constitute “forward-looking statements.” Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “will” and similar expressions identify forward-looking statements, which generally are not historical in nature. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements. Management believes that these forward-looking statements are reasonable as and when made. However, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our Company’s historical experience and our present expectations or projections, including without limitation our expectations regarding the Company’s outlook, long-term organic and inorganic growth, and customer acceptance of our business solutions referenced above under “Business” and below under “Business Environment and Company Outlook.” These risks and uncertainties include, but are not limited to, those described below in Item 1A. Risk Factors, and elsewhere in this report and those described from time to time in our future reports filed with the United States Securities and Exchange Commission, or SEC. As a result of such risks and uncertainties, we urge you not to place undue reliance on any such forward-looking statements. Forward-looking statements speak only as of the date when made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
AVAILABLE INFORMATION
Detailed information about us is contained in our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other reports, and amendments to those reports, that we file with, or furnish to, the SEC. These reports are available free of charge at our website, www.equifax.com, as soon as reasonably practicable after we electronically file such reports with or furnish such reports to the SEC. However, our website and any contents thereof should not be considered to be incorporated by reference into this document. We will furnish copies of such reports free of charge upon written request to Corporate Secretary, Equifax Inc., P.O. Box 4081, Atlanta, Georgia, 30302.
ITEM 1A. RISK FACTORS
All of the risks and uncertainties described below and the other information included in this Form 10-K should be considered and read carefully. The risks described below are not the only ones facing us. The occurrence of any of the following risks or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adversely affect our business, financial condition or results of operations. This Form 10-K also contains forward-looking statements and estimates that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of specific factors, including the risks and uncertainties described below.
Uncertain general economic conditions could materially adversely affect us.
We and our customers continue to be sensitive to negative changes in general economic conditions, both inside and outside the U.S. Business customers use our credit information and related analytical services and data to process applications for new credit cards, automobile loans, home and equity loans and other consumer loans, and to manage their existing credit relationships. Bank and other lenders’ willingness to extend credit is adversely affected by elevated consumer delinquency and loan losses in a weak economy. Consumer demand for credit (i.e., rates of spending and levels of indebtedness) also tends to grow more slowly or decline during periods of economic contraction or slow economic growth. High or rising rates of unemployment and interest, declines in income, home prices, or investment values, lower consumer confidence and reduced access to credit adversely affect demand for our products and services, and consequently our revenue, as consumers may continue to postpone or reduce their spending and use of credit, and lenders may reduce the amount of credit offered or available.
The loss of access to credit, employment, financial and other data from external sources could harm our ability to provide our products and services.
We rely extensively upon data from external sources to maintain our proprietary and non-proprietary databases, including data received from customers, strategic partners and various government and public record sources. This data includes the widespread and voluntary contribution of credit data from most lenders in the U.S and many other markets as well
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as the contribution of data under proprietary contractual agreements, such as employers’ contribution of employment and income data to The Work Number, financial institutions’ contribution of individual financial data to IXI, telecommunications, cable and utility companies’ contribution of payment and fraud data to the National Cable, Telecommunications and Utility Exchange, and financial institutions’ contribution of small business borrowing information to the Small Business Financial Exchange. Although historically we have not experienced material issues in this regard, our data sources could withdraw, delay receipt of or increase the cost of their data provided to us for a variety of reasons, including legislatively or judicially imposed restrictions on use, security breaches or competitive reasons. Where we currently have exclusive use of data, the providers of the data sources could elect to make the information available to competitors. We also compete with several of our third-party data suppliers. If a substantial number of data sources or certain key data sources were to withdraw or be unable to provide their data, if we were to lose access to data due to government regulation, if we lose exclusive right to the use of data, or if the collection of data becomes uneconomical, our ability to provide products and services to our clients could be materially adversely impacted, which could result in decreased revenue, net income and earnings per share. There can be no assurance that we would be able to obtain data from alternative sources if our current sources become unavailable.
Our markets are highly competitive and new product introductions and pricing strategies being offered by our competitors could decrease our sales and market share or require us to enhance our products and services or reduce our prices in a manner that reduces our operating margins.
We operate in a number of geographic, product and service markets that are highly competitive. Competitors may develop products and services that are superior to or that achieve greater market acceptance than our products and services. The size of our competitors varies across market segments, as do the resources we have allocated to the segments we target. Therefore, some of our competitors may have significantly greater financial, technical, marketing or other resources than we do in one or more of our market segments, or overall. As a result, our competitors may be in a position to respond more quickly than we can to new or emerging technologies and changes in customer requirements, or may devote greater resources than we can to the development, enhancement, promotion, sale and support of products and services. Moreover, new competitors or alliances among our competitors may emerge and potentially reduce our market share, revenue or margins.
We also sell our information to competing firms, and buy information from certain of our competitors, in order to sell “tri-bureau” and other products, most notably into the mortgage and direct to consumer markets. Changes in prices between competitors for this information and/or changes in the design or sale of tri-bureau versus single bureau product offerings may affect our revenue or profitability.
Some of our competitors may choose to sell products competitive to ours at lower prices by accepting lower margins and profitability, or may be able to sell products competitive to ours at lower prices given proprietary ownership of data, technological superiority or economies of scale. Price reductions by our competitors could negatively impact our margins and results of operations and could also harm our ability to obtain new customers on favorable terms. Historically, certain of our key products have experienced declines in per unit pricing due to competitive factors and customer demand. Since a significant portion of our operating expenses is relatively fixed in nature due to sales, information technology and development and other costs, if we were unable to respond quickly enough to changes in competition or customer demand, we could experience further reductions in our operating margins.
If we do not introduce successful new products, services and analytical capabilities in a timely manner, our competitiveness and operating results will suffer.
We generally sell our products in industries that are characterized by rapid technological changes, frequent new product and service introductions and changing industry standards. In addition, certain of the markets in which we operate are seasonal and cyclical. Without the timely introduction of new products, services and enhancements, our products and services will become technologically or commercially obsolete over time, in which case our revenue and operating results would suffer. The success of our new products and services will depend on several factors, including our ability to properly identify customer needs; innovate and develop new technologies, services and applications; successfully commercialize new technologies in a timely manner; produce and deliver our products in sufficient volumes on time; differentiate our offerings from competitor offerings; price our products competitively; anticipate our competitors’ development of new products, services or technological innovations; and control product quality in our product development process.
If we experience system constraints or failures, or our customers do not modify and/or upgrade their systems to accept new releases of our products and services, our services to our customers could be delayed or interrupted, which could result in lost revenues or customers, lower margins, or other harm to our business and reputation.
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We depend on reliable, stable, efficient and uninterrupted operation of our technology network, systems, and data centers to provide service to our customers. Many of the services and systems upon which rely have been outsourced to third parties. In addition, many of our revenue streams are dependent on links to third party telecommunications providers. These systems and operations, and the personnel that support, service and operate these systems, could be exposed to interruption, damage or destruction from power loss, telecommunication failures, computer viruses, denial-of-service attacks, human error, fire, natural disasters, war, terrorist acts or civil unrest. We may not have sufficient disaster recovery or redundant operations in place to cover a loss or failure of systems or telecommunications links in a timely manner. Any significant delay or interruption could result in lost revenues or customers, lower margins, or other significant harm to our business or reputation.
Security breaches and other disruptions to our information technology infrastructure could interfere with our operations, and could compromise Company, customer and consumer information, exposing us to liability which could cause our business and reputation to suffer.
In the ordinary course of business, we rely upon information technology networks and systems, some of which are managed by third parties, to process, transmit and store electronic information, and to manage or support a variety of business processes and activities, including business-to-business and business-to-consumer electronic commerce and internal accounting and financial reporting systems. Additionally, we collect and store sensitive data, including intellectual property, proprietary business information and personally identifiable information of our customers, employees, consumers and suppliers, in data centers and on information technology networks. The secure and uninterrupted operation of these networks and systems, and of the processing and maintenance of this information, is critical to our business operations and strategy.
Despite our substantial investment in physical and technological security measures, employee training, contractual precautions and business continuity plans, our information technology networks and infrastructure or those of our third-party vendors and other service providers could be vulnerable to damage, disruptions, shutdowns, or breaches of confidential information due to criminal conduct, denial of service or other advanced persistent attacks by hackers, breaches due to employee error or malfeasance, or other disruptions during the process of upgrading or replacing computer software or hardware, power outages, computer viruses, telecommunication or utility failures or natural disasters or other catastrophic events. Unauthorized access to data files or our information technology systems and applications could result in inappropriate use, change or disclosure of sensitive and/or personal data of our customers, employees, consumers and suppliers.
We are regularly the target of attempted cyber and other security threats and must continuously monitor and develop our information technology networks and infrastructure to prevent, detect, address and mitigate the risk of unauthorized access, misuse, computer viruses and other events that could have a security impact. Insider or employee cyber and security threats are increasingly a concern for all large companies, including ours. Although we are not aware of any material breach of our data, properties, networks or systems, if one or more of such events occur, this potentially could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could subject us to litigation, regulatory fines, penalties or reputational damage, any of which could have a material effect on our cash flows, competitive position, financial condition or results of operations. Our property and business interruption insurance may not be adequate to compensate us for all losses or failures that may occur. Also, our third-party insurance coverage will vary from time to time in both type and amount depending on availability, cost and our decisions with respect to risk retention.
Our customers and we are subject to various current governmental regulations, and could be affected by new laws or regulations, compliance with which may cause us to incur significant expenses and change our business practices, and if we fail to maintain satisfactory compliance with certain regulations, we could be subject to civil or criminal penalties.
We are subject to a number of U.S. and state and foreign laws and regulations relating to consumer privacy, data and financial protection. These regulations are complex, change frequently, have tended to become more stringent over time, and are subject to administrative interpretation and judicial construction in ways that could harm our business. Foreign data protection, privacy, consumer protection and other laws and regulations are often more restrictive than those in the U.S. There are also a number of legislative proposals pending before the U.S. Congress, various state legislative bodies and foreign governments concerning data protection that could affect us.
Under Title X of the Dodd-Frank Act, the CFPB has broad powers to promulgate, administer and enforce consumer financial regulations, including those applicable to us and to many of our customers. The CFPB has oversight of the FCRA, the federal regulation most directly impacting U.S. operations. The CFPB is also charged with defining “unfair, deceptive or abusive acts and practices”, known as “UDAAP”. Also, where a company has violated Title X of the Dodd-Frank Act, or CFPB regulations under Title X, the Dodd-Frank Act empowers state attorneys general and state regulators to bring civil actions for the kind of cease and desist orders available to the CFPB (but not for civil penalties). During 2015, the CFPB
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publicly announced 50 enforcement actions, imposing $212.8 million in civil money penalties, and ordering $1.9 billion in restitution and $636.3 million in balance reductions. We are currently the subject of investigations by state attorneys general and the CFPB as more fully described under Item. 3 Legal Proceedings in this Form 10-K.
In the U.K., we are subject to a regulatory framework which provides for primary regulation by the FCA. The FCA focuses on consumer protection and market regulation as well as prudential supervision of regulated financial institutions. The FCA has significant powers, including the power to regulate conduct related to the marketing of financial products, specify minimum standards and to place requirements on products, impose unlimited fines, and to investigate organizations and individuals. In addition, the FCA is able to ban financial products for up to a year while considering an indefinite ban; it has the power to instruct firms to immediately retract or modify promotions which it finds to be misleading, and to publish such decisions. Our core credit reporting (“credit reference”) and debt collections services businesses in the U.K. are subject to FCA supervision and we will require certain corporate and “approved person” authorizations from the FCA to carry on such businesses. We submitted a license application for our debt collection services businesses (TDX) prior to the June 30, 2015 deadline, and expect to apply for authorization in our capacity as a credit reference agencies by the March 31, 2016 deadline. Although we do not currently anticipate any issues in receiving authorization, to the extent applicable approvals are not obtained in a timely manner, or at all, we may not conduct these businesses in the U.K.
We are devoting substantial compliance, legal and operational business resources to facilitate compliance with applicable regulations and requirements. Additionally, we cooperate with CFPB supervisory examinations and respond to other state and federal investigations of our business practices. Any failure by us to comply with, or remedy any violations of, applicable laws and regulations could result in the curtailment of certain of our operations, the imposition of fines and penalties, and restrictions on our ability to carry on or expand our operations. In addition, because many of our products are regulated or sold to customers in various industries, we must comply with additional regulations in marketing our products. We cannot predict the ultimate impact on our business of new or proposed CFPB, FCA or other rules, supervisory examinations or government investigations or enforcement actions.
These laws and regulations (as well as actions that may be taken by legislatures and regulatory bodies in other countries) and the consequences of any violation could limit our ability to pursue business opportunities we might otherwise consider engaging in, impose additional costs on us, result in significant loss of revenue, result in significant restitution and fines, impact the value of assets we hold, or otherwise significantly adversely affect our business. See “Item 1. Business – Government Regulation” in this Form 10-K.
We are regularly involved in claims, suits, government investigations, supervisory examinations and other proceedings that may result in adverse outcomes.
We are regularly involved in claims, suits, government investigations, supervisory examinations and regulatory proceedings arising from the ordinary course of our business, including actions with respect to consumer protection and data protection, including purported class action lawsuits. Such claims, suits, government investigations, and proceedings are inherently uncertain and their results cannot be predicted with certainty. Regardless of their outcome, such legal proceedings can have an adverse impact on us because of legal costs, diversion of management and other personnel, and other factors. In addition, it is possible that a resolution of one or more such proceedings could result in reputational harm, liability, penalties, or sanctions, as well as judgments, consent decrees, or orders preventing us from offering certain features, functionalities, products, or services, or requiring a change in our business practices, products or technologies, which could in the future materially and adversely affect our business, operating results, and financial condition. The FCRA contains an attorney fee shifting provision to provide an incentive for consumers to bring individual and class action lawsuits against a CRA for violation of the FCRA, and the number of consumer lawsuits (both individual and class action) against us alleging a violation of FCRA and our resulting costs associated with resolving these lawsuits have increased substantially over the past several years.
We rely, in part, on acquisitions, joint ventures and other alliances to grow our business and expand our geographic reach. If we are unable to make acquisitions or successfully develop and maintain joint ventures and other alliances, our growth may be adversely impacted. In addition, the acquisition, integration or divestiture of businesses by us may not produce the expected financial or operating results.
In January 2014, we acquired the TDX, a debt placement service and debt management platform company in the United Kingdom for approximately $323 million. During 2013, we acquired TrustedID, a direct-to-consumer identity protection business, and several smaller international businesses. In addition, as described in more detail in Item 7, we have entered into an agreement to acquire Veda, which if completed, will give us a significant presence in Australia and New Zealand, where we do not currently have significant operations. Expected benefits, synergies and growth from these initiatives may not
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materialize as planned. We may have difficulty assimilating new businesses and their products, services, technologies and personnel into our operations. We may also have difficulty integrating and operating businesses in countries and geographies where we do not currently have a significant presence. These difficulties could disrupt our ongoing business, distract our management and workforce, increase our expenses and materially adversely affect our operating results and financial condition. Also, we may not be able to retain key management and other critical employees after an acquisition.
Dependence on outsourcing certain portions of our operations may adversely affect our ability to bring products to market and damage our reputation. Dependence on outsourced information technology and other administrative functions may impair our ability to operate effectively.
As part of our efforts to streamline operations and to reduce operating costs, we have outsourced various components of our application development, information technology, operational support and administrative functions and will continue to evaluate additional outsourcing. Although we have implemented service level agreements and have established monitoring controls, if our outsourcing vendors fail to perform their obligations in a timely manner or at satisfactory quality levels, our ability to bring products to market and support our customers, and our reputation could suffer. Any failure to perform on the part of these third-party providers could impair our ability to operate effectively and could result in lower future revenue, unexecuted efficiencies and adversely impact our results of operations and our financial condition. Much of our outsourcing takes place in developing countries and, as a result, may be subject to geopolitical uncertainty.
The impact of consolidation in our customer end markets is difficult to predict and may harm our business.
The financial services, mortgage, retail and telecommunications industries to which we sell our products and services are intensely competitive and have been subject to increasing consolidation. Continuation of the consolidation trends in these and other industries could result in lower average prices for the larger combined entities, lower combined purchases of our services than were purchased cumulatively by separate entities prior to consolidation or existing competitors increasing their market share in newly consolidated entities, which could have a material adverse effect on our business, financial condition and results of operations. We may not be able to compete successfully in an increasingly consolidated industry and cannot predict with certainty how industry consolidation will affect our competitors or us.
The demand for some of our products and services may be negatively impacted to the extent the availability of free or less expensive consumer information increases.
Public or commercial, sources of free or relatively inexpensive consumer credit, credit score and other information have become increasingly available, particularly through the internet, and this trend is expected to continue. Governmental agencies in particular have increased the amount of information to which they provide free public access and these or other sources of free or relatively inexpensive consumer information from competitors or other commercial sources may reduce demand for our services, particularly in our USIS and Personal Solutions business units. In addition, recently there has been an increase in companies offering free or low-cost direct to consumer credit services (such as credit scores, reports and monitoring) as part of alternative business models that use such services as a means to introduce consumers to premium products and services. To the extent that our customers choose not to obtain services from us and instead rely on information obtained at no cost or relatively inexpensively from these other sources, our business, financial condition and results of operations may be adversely affected.
Our retirement and post-retirement pension plans are subject to financial market risks that could adversely affect our future results of operations and cash flows.
We have significant retirement and post retirement pension plan assets and obligations. The performance of the financial markets and interest rates impact our plan expenses and funding obligations. Significant decreases in market interest rates, decreases in the fair value of plan assets and investment losses on plan assets will increase our funding obligations, and adversely impact our results of operations and cash flows.
If our government contracts are terminated, if we are suspended from government work, or if our ability to compete for new contracts is adversely affected, our business could suffer.
We derive a portion of our revenue from direct and indirect sales to U.S., state, local and foreign governments and their respective agencies. Such contracts are subject to various procurement laws and regulations, and contract provisions relating to their formation, administration and performance. Failure to comply with these laws, regulations or provisions in our government contracts could result in the imposition of various civil and criminal penalties, termination of contracts, forfeiture of profits, suspension of payments, or suspension of future government contracting. If our government contracts are terminated,
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if we are suspended from government work, or if our ability to compete for new contracts is adversely affected, our business could suffer.
Third parties may claim that we are infringing their intellectual property and we could suffer significant litigation or licensing expenses or be prevented from selling products or services.
From time to time, third parties may claim that one or more of our products or services infringe their intellectual property rights. We analyze and take action in response to such claims on a case by case basis. Any dispute or litigation regarding patents or other intellectual property could be costly and time-consuming due to the complexity of our technology and the uncertainty of intellectual property litigation and could divert our management and key personnel from our business operations. A claim of intellectual property infringement could force us to enter into a costly or restrictive license agreement, which might not be available under acceptable terms or at all, or could subject us to significant damages or to an injunction against development and sale of certain of our products or services. Our intellectual property portfolio may not be useful in asserting a counterclaim, or negotiating a license, in response to a claim of intellectual property infringement. In certain of our businesses we rely on third-party intellectual property licenses and we cannot ensure that these licenses will be available to us in the future on favorable terms or at all.
Third parties may infringe our intellectual property and we may suffer competitive injury or expend significant resources enforcing our rights.
Our success increasingly depends on our proprietary technology. We rely on various intellectual property rights, including patents, copyrights, database rights, trademarks and trade secrets, as well as confidentiality provisions and licensing arrangements, to establish our proprietary rights. The extent to which such rights can be protected varies in different jurisdictions. If we do not enforce our intellectual property rights successfully our competitive position may suffer which could harm our operating results. Our pending patent and trademark applications may not be allowed or competitors may challenge the validity or scope of our intellectual property rights. In addition, our patents, copyrights, trademarks and other intellectual property rights may not provide us a significant competitive advantage.
We may need to spend significant resources monitoring our intellectual property rights and we may or may not be able to detect infringement by third parties. Our competitive position may be harmed if we cannot detect infringement and enforce our intellectual property rights quickly or at all. In some circumstances, enforcement may not be available to us because an infringer has a dominant intellectual property position or for other business reasons. In addition, competitors might avoid infringement by designing around our intellectual property rights or by developing non-infringing competing technologies. Intellectual property rights and our ability to enforce them may be unavailable or limited in some countries which could make it easier for competitors to capture market share and could result in lost revenue.
Economic, political and other risks associated with international sales and operations could adversely affect our results of operations.
Sales outside the U.S. comprised 23% of our net operating revenue in 2015 and are expected to increase following the acquisition of Veda. As, as a result, our business is subject to various risks associated with doing business internationally. We anticipate that revenue from international operations will continue to represent an increasing portion of our total revenue, particularly in anticipation of the Veda acquisition. In addition, many of our employees, suppliers, job functions and facilities are located outside the U.S. Accordingly, our future results could be harmed by a variety of factors including:
• | changes in specific country or region political, economic or other conditions; |
• | trade protection measures; |
• | data privacy and consumer protection regulations; |
• | difficulty in staffing and managing widespread operations; |
• | differing labor, intellectual property protection and technology standards and regulations; |
• | business licensing requirements or other requirements relating to making foreign direct investments, which could increase our cost of doing business in certain jurisdictions, prevent us from entering certain markets, increase our operating costs or lead to penalties or restrictions; |
• | difficulties associated with repatriating cash generated or held abroad in a tax-efficient manner; |
• | implementation of exchange controls; |
• | geopolitical instability, including terrorism and war; and |
• | foreign currency changes. |
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We earn revenue, pay expenses, own assets and incur liabilities in countries using currencies other than the U.S. dollar, including among others the British pound, the Canadian dollar, the Brazilian real, the Argentine peso, the Chilean peso and the Euro, and following the completion of the Veda acquisition, the Australian dollar. Because our consolidated financial statements are presented in U.S. dollars, we must translate revenue, income and expenses, as well as assets and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each reporting period. Therefore, increases or decreases in the value of the U.S. dollar against other major currencies will affect our net operating revenues, operating income and the value of balance sheet items denominated in foreign currencies. In 2015, a general weakening of foreign currencies in countries where we have operations against the U.S. dollar had a negative impact on our results as reported in U.S. dollars. See “Segment Financial Results – International – Latin America", "- Europe", and “- Canada” and “Effects of Inflation and Changes in Foreign Currency Exchange Rates” in the Management’s Discussion and Analysis section of this Form 10-K. Because of the geographic diversity of our operations, weaknesses in some currencies might be offset by strengths in others over time. We generally do not mitigate the risks associated with fluctuating exchange rates, although we may from time to time through forward contracts or other derivative instruments hedge a portion of our translational foreign currency exposure or exchange rate risks associated with material transactions which are denominated in a foreign currency. The use of such hedging activities may not offset any or more than a portion of the adverse financial effects of unfavorable movements in foreign exchange rates over the limited time the hedges are in place. Accordingly, fluctuations in foreign currency exchange rates, particularly the strengthening of the U.S. dollar against major currencies, may materially affect our consolidated financial results.
We also have a cost method investment in a credit information company in Brazil valued in Brazilian reais. Economic and competition risks within Brazil, and the company’s ability to successfully implement its strategic and operating plans, have had an adverse financial impact on the value of our investment and could result in an additional impairment of the investment.
Compliance with applicable U.S. and foreign laws and regulations, such as anti-corruption laws, tax laws, foreign exchange controls and restrictions on repatriation of earnings or other similar restraints, data privacy requirements, labor laws and anti-competition relations increases the cost of doing business in foreign jurisdictions. Although we have implemented policies and procedures to comply with these laws and regulations, a violation by our employees, contractors or agents could nevertheless occur.
A downgrade to our credit ratings would increase our cost of borrowing under our credit facility and adversely affect our ability to access the capital markets.
We have an unsecured 364-day revolving credit facility that matures November 20, 2016 and an unsecured credit facility consisting of a revolver that matures on November 21, 2020 and a term loan that matures on November 21, 2018 (the “Credit Facilities”). The cost of borrowing under Credit Facilities and our ability and the terms under which we may access the credit markets are affected by credit ratings assigned to our indebtedness by the major credit rating agencies. These ratings are premised on our performance under assorted financial metrics, such as leverage and interest coverage ratios and other measures of financial strength, business and financial risk, industry conditions, transparency with rating agencies and timeliness of financial reporting. Our current ratings have served to lower our borrowing costs and facilitate access to a variety of lenders. However, there can be no assurance that our credit ratings or outlook will not be lowered in the future in response to adverse changes in these metrics caused by our operating results or by actions that we take, such as incurring additional indebtedness or by returning excess cash to shareholders through dividends or under our share repurchase program. A downgrade of our credit ratings would increase our cost of borrowing under the Credit Facilities, negatively affect our ability to access the capital markets on advantageous terms, or at all, negatively affect the trading price of our securities and have a material adverse effect on our business, financial condition and results of operations.
Changes in interest rates could adversely affect our cost of capital and net income.
Rising interest rates, credit market dislocations and decisions and actions by credit rating agencies can affect the availability and cost of our funding and adversely affect our net income.
Our business will suffer if we are not able to retain and hire key personnel.
Our future success depends partly on the continued service of our key development, sales, marketing, executive and administrative personnel. Additionally, increased retention risk exists in certain key areas of our operations that require specialized skills, such as maintenance of certain legacy computer systems, data security experts and analytical modelers. If we fail to retain and hire a sufficient number of these personnel, we will not be able to maintain or expand our business. We believe our pay levels are competitive within the regions in which we operate. However, there is also intense competition for certain
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highly technical specialties in geographic areas where we continue to recruit, and it may become more difficult to retain our key employees.
Changes in income tax laws can significantly impact our net income.
Federal and state governments in the U.S. as well as a number of other governments around the world are currently facing significant fiscal pressures and have considered or may consider changes to their tax laws for revenue raising or economic competitiveness reasons. Changes to tax laws can have immediate impacts, either favorable or unfavorable, on our results of operations and cash flows, and may impact our competitive position versus certain competitors who are domiciled in other jurisdictions and subject to different tax laws.
We are subject to a variety of other general risks and uncertainties inherent in doing business.
In addition to the specific factors discussed above, we are subject to risks that are inherent to doing business. These include growth rates, general economic and political conditions, customer satisfaction with the quality of our services, costs of obtaining insurance, changes in unemployment rates, and other events that can impact revenue and the cost of doing business.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our executive offices are located at 1550 Peachtree Street, N.W., Atlanta, Georgia. Our other properties are geographically distributed to meet sales and operating requirements worldwide. We consider these properties to be both suitable and adequate to meet our current operating requirements. We ordinarily lease office space for conducting our business and are obligated under approximately 80 leases and other rental arrangements for our field locations. We owned 9 office buildings at December 31, 2015, including our executive offices, one campus which houses our Alpharetta, Georgia data center, two buildings utilized by our Workforce Solutions operations located in St. Louis, Missouri and Charleston, South Carolina, as well as four buildings utilized by our Latin America operations located in Mexico City, Mexico, Sao Paulo, Brazil, and Asuncion, Paraguay. We also own 23.5 acres adjacent to the Alpharetta, Georgia data center.
For additional information regarding our obligations under leases, see Note 7 of the Notes to Consolidated Financial Statements in this report. We believe that suitable additional space will be available to accommodate our future needs.
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ITEM 3. LEGAL PROCEEDINGS
California Bankruptcy Litigation. In consolidated actions filed in the U.S. District Court for the Central District of California, captioned Terri N. White, et al. v. Equifax Information Services LLC, Jose Hernandez v. Equifax Information Services LLC, Kathryn L. Pike v. Equifax Information Services LLC, and Jose L. Acosta, Jr., et al. v. Trans Union LLC, et al. , plaintiffs asserted that Equifax violated federal and state law (the FCRA, the California Credit Reporting Act and the California Unfair Competition Law) by failing to follow reasonable procedures to determine whether credit accounts are discharged in bankruptcy, including the method for updating the status of an account following a bankruptcy discharge. On August 20, 2008, the District Court approved a Settlement Agreement and Release providing for certain changes in the procedures used by defendants to record discharges in bankruptcy on consumer credit files. That settlement resolved claims for injunctive relief, but not plaintiffs’ claims for damages. On May 7, 2009, the District Court issued an order preliminarily approving an agreement to settle remaining class claims. The District Court subsequently deferred final approval of the settlement and required the settling parties to send a supplemental notice to those class members who filed a claim and objected to the settlement or opted out, with the cost for the re-notice to be deducted from the plaintiffs’ counsel fee award. Mailing of the supplemental notice was completed on February 15, 2011. The deadline for this group of settling plaintiffs to provide additional documentation to support their damage claims or to opt-out of the settlement was March 31, 2011. On July 15, 2011, following another approval hearing, the District Court approved the settlement. Several objecting plaintiffs subsequently filed notices of appeal to the U.S. Court of Appeals for the Ninth Circuit, which, on April 22, 2013, issued an order remanding the case to the District Court for further proceedings. On January 21, 2014, the District Court denied the objecting plaintiffs’ motion to disqualify counsel for the settling plaintiff and granted the motion of counsel for the settling plaintiffs’ to be appointed as interim lead class counsel. On May 1, 2014, the District Court granted the objecting plaintiffs motion for leave to file an interlocutory appeal from the January 21, 2014 Order and the objectors filed a petition for permission to appeal to the U.S. Court of Appeals for the Ninth Circuit. On July 9, 2014, the U.S. Court of Appeals for the Ninth Circuit granted the petition for permission to appeal. Briefing is complete and the oral argument occurred on November 5, 2015. The parties are awaiting a ruling from the Court of Appeals.
State Attorneys General Investigation. The Attorney General of the State of Mississippi commenced an investigation in July 2013 into certain business practices of the nationwide consumer reporting agencies (Equifax, Experian and TransUnion). We are cooperating with the Attorney General of Mississippi in the investigation. At this time, we are unable to predict the outcome of the Mississippi investigation, including whether it will result in any action or proceeding being brought against us.
CFPB Investigation. In February 2014, we received a Civil Investigative Demand (a “CID”) from the Consumer Financial Protection Bureau (the “CFPB”) as part of its investigation to determine whether nationwide consumer reporting agencies have been or are engaging in unlawful acts or practices relating to the advertising, marketing, sale or provision of consumer reports, credit scores or credit monitoring products in violation of the Dodd Frank Act or the Fair Credit Reporting Act. The CID requests the production of documents and answers to written questions. We are cooperating with the CFPB in its investigation. At this time, we are unable to predict the outcome of this CFPB investigation, including whether the investigation will result in any action or proceeding against us.
Other. Equifax has been named as a defendant in various other legal actions, including administrative claims, regulatory matters, government investigations, class actions and other litigation arising in connection with our business. Some of the legal actions include claims for substantial compensatory or punitive damages or claims for indeterminate amounts of damages. We believe we have strong defenses to and, where appropriate, will vigorously contest, many of these matters. Given the number of these matters, some are likely to result in adverse judgments, penalties, injunctions, fines or other relief. We may explore potential settlements before a case is taken through trial because of the uncertainty and risks inherent in the litigation process.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Equifax’s common stock is traded on the New York Stock Exchange under the symbol “EFX.” As of January 31, 2016, Equifax had approximately 4,308 holders of record; however, Equifax believes the number of beneficial owners of common stock exceeds this number.
The table below sets forth the high and low sales prices per share of Equifax common stock, as reported on the New York Stock Exchange, for each quarter in the last two fiscal years and dividends declared per share:
High Sales Price | Low Sales Price | Dividends (1) | |||||||||
(In millions) | |||||||||||
2015 | |||||||||||
First Quarter | $ | 94.90 | $ | 79.62 | $ | 0.29 | |||||
Second Quarter | $ | 101.13 | $ | 91.61 | $ | 0.29 | |||||
Third Quarter | $ | 105.86 | $ | 90.94 | $ | 0.29 | |||||
Fourth Quarter | $ | 114.46 | $ | 96.22 | $ | 0.29 | |||||
2014 | |||||||||||
First Quarter | $ | 72.90 | $ | 66.97 | $ | 0.25 | |||||
Second Quarter | $ | 73.39 | $ | 64.75 | $ | 0.25 | |||||
Third Quarter | $ | 79.94 | $ | 72.00 | $ | 0.25 | |||||
Fourth Quarter | $ | 82.63 | $ | 69.04 | $ | 0.25 | |||||
(1) | Equifax’s Senior Credit Facilities, as defined in Item 7 of this Form 10-K, restricts our ability to pay cash dividends on our capital stock or repurchase capital stock if a default exists or would result according to the terms of the credit agreement. |
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Shareholder Return Performance Graph
The graph on the following page compares Equifax’s five-year cumulative total shareholder return with that of the Standard & Poor’s Composite Stock Index (S&P 500) and a peer group index, the Dow Jones U.S. General Financial Index. The graph assumes that value of the investment in our Common Stock and each index was $100 on the last trading day of 2010 and that all quarterly dividends were reinvested without commissions. Our past performance may not be indicative of future performance.
COMPARATIVE FIVE-YEAR CUMULATIVE TOTAL RETURN AMONG EQUIFAX INC., S&P 500 INDEX, AND DOW JONES U.S. GENERAL FINANCIAL INDEX
Fiscal Year Ended December 31, | |||||||||||||||||
Initial | 2011 | 2012 | 2013 | 2014 | 2015 | ||||||||||||
Equifax Inc. | 100.00 | 110.87 | 157.34 | 203.78 | 241.79 | 336.79 | |||||||||||
S&P 500 Index | 100.00 | 102.11 | 118.45 | 156.82 | 178.29 | 180.75 | |||||||||||
DJ US General Financial Index | 100.00 | 88.38 | 115.30 | 177.16 | 196.18 | 190.96 | |||||||||||
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The table below contains information with respect to purchases made by or on behalf of Equifax of its common stock during the fourth quarter ended December 31, 2015:
Issuer Purchases of Equity Securities
Period | Total Number of Shares Purchased (1) | Average Price Paid Per Share (2) | Total Number of Shares Purchased as Part of Publicly-Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (3) | ||||||||||
October 1 - October 31, 2015 | 79,405 | $ | — | — | $ | 667,199,250 | ||||||||
November 1 - November 30, 2015 | 1,130 | $ | — | — | $ | 667,199,250 | ||||||||
December 1 - December 31, 2015 | 1,623 | $ | — | — | $ | 667,199,250 | ||||||||
Total | 82,158 | $ | — | — | $ | 667,199,250 | ||||||||
(1) | The total number of shares purchased includes: (a) shares purchased pursuant to our publicly-announced share repurchase program, or Program; and (b) shares surrendered, or deemed surrendered, in satisfaction of the exercise price and/or to satisfy tax withholding obligations in connection with the exercise of employee stock options and vesting of restricted stock, totaling 79,405 shares for the month of October 2015, 1,130 shares for the month of November 2015 and 1,623 shares for the month of December 2015. |
(2) | Average price paid per share for shares purchased as part of our Program (includes brokerage commissions). |
(3) | Under the Program, we repurchased 2.1 million common shares during the twelve months ended December 31, 2015 for $196.3 million. At December 31, 2015, the amount authorized for future share repurchases under the Program was $667.2 million. |
Information relating to compensation plans under which the Company’s equity securities are authorized for issuance is included in the section captioned “Equity Compensation Plan Information” in our 2016 Proxy Statement and is incorporated herein by reference.
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ITEM 6. SELECTED FINANCIAL DATA
The table below summarizes our selected historical financial information for each of the last five years. The summary of operations data for the years ended December 31, 2015, 2014, 2013, and the balance sheet data as of December 31, 2015 and 2014, have been derived from our audited Consolidated Financial Statements included in this report. The summary of operations data for the years ended December 31, 2012 and 2011, and the balance sheet data as of December 31, 2013, 2012 and 2011, have been derived from our audited Consolidated Financial Statements not included in this report. The historical selected financial information may not be indicative of our future performance and should be read in conjunction with the information contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations, and the Consolidated Financial Statements and the accompanying Notes to the Consolidated Financial Statements in this report.
Twelve Months Ended December 31, | |||||||||||||||||||
2015 (1)(2) | 2014 (3) | 2013(4)(5) | 2012(6)(7) | 2011(8) | |||||||||||||||
(In millions, except per share data) | |||||||||||||||||||
Summary of Operations: | |||||||||||||||||||
Operating revenue | $ | 2,663.6 | $ | 2,436.4 | $ | 2,303.9 | $ | 2,073.0 | $ | 1,893.2 | |||||||||
Operating expenses | 1,969.7 | 1,798.2 | 1,692.7 | 1,593.0 | 1,424.6 | ||||||||||||||
Operating income | 693.9 | 638.2 | 611.2 | 480.0 | 468.6 | ||||||||||||||
Consolidated income from continuing operations | 434.8 | 374.0 | 341.5 | 275.3 | 238.8 | ||||||||||||||
Discontinued operations, net of tax (2)(7) | — | — | 18.4 | 5.5 | 2.9 | ||||||||||||||
Net income attributable to Equifax | $ | 429.1 | $ | 367.4 | $ | 351.8 | $ | 272.1 | $ | 232.9 | |||||||||
Dividends paid to Equifax shareholders | $ | 137.8 | $ | 121.2 | $ | 106.7 | $ | 86.0 | $ | 78.1 | |||||||||
Diluted earnings per share | |||||||||||||||||||
Net income from continuing operations attributable to Equifax | $ | 3.55 | $ | 2.97 | $ | 2.69 | $ | 2.18 | $ | 1.86 | |||||||||
Discontinued operations attributable to Equifax | — | — | 0.15 | 0.04 | 0.02 | ||||||||||||||
Net income attributable to Equifax | $ | 3.55 | $ | 2.97 | $ | 2.84 | $ | 2.22 | $ | 1.88 | |||||||||
Cash dividends declared per share | $ | 1.16 | $ | 1.00 | $ | 0.88 | $ | 0.72 | $ | 0.64 | |||||||||
Weighted-average shares outstanding (diluted) | 120.9 | 123.5 | 123.7 | 122.5 | 123.7 | ||||||||||||||
As of December 31, | |||||||||||||||||||
2015 (1)(2) | 2014 (3) | 2013(4)(5) | 2012(6)(7) | 2011(8) | |||||||||||||||
(In millions) | |||||||||||||||||||
Balance Sheet Data: | |||||||||||||||||||
Total assets | $ | 4,509.0 | $ | 4,661.0 | $ | 4,522.5 | $ | 4,505.9 | $ | 3,512.5 | |||||||||
Short-term debt and current maturities | 49.3 | 380.4 | 296.5 | 283.3 | 47.2 | ||||||||||||||
Long-term debt, net of current portion | 1,145.9 | 1,145.7 | 1,145.5 | 1,447.4 | 966.0 | ||||||||||||||
Total debt, net | 1,195.2 | 1,526.1 | 1,442.0 | 1,730.7 | 1,013.2 | ||||||||||||||
Total equity | 2,350.4 | 2,234.6 | 2,341.0 | 1,959.2 | 1,722.1 | ||||||||||||||
(1) | In the first quarter of 2015, we recorded a $20.7 million restructuring charge ($13.2 million, net of tax) all of which was recorded in selling, general and administrative expenses on our Consolidated Statements of Income. This charge resulted from our continuing efforts to realign our internal resources to support the Company’s strategic objectives and increase the integration of our global operations. For additional information, see Note 13 of the Notes to Consolidated Financial Statements in this report. |
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(2) | During the second quarter of 2015, the management of Boa Vista Servicos S.A. ("BVS"), in which we hold a 15% cost method investment, updated the financial projections. The updated projections, along with the continued weakness in the Brazilian consumer and small commercial credit markets were considered indicators of impairment.As a result of these changes, and the associated near-term changes in cash flow expected from the business, we recorded a 46.0 million Brazilian Reais ($14.8 million) impairment of our investment. For additional information, see Note 2 of the Notes to Consolidated Financial Statements in this report. |
(3) | During the first quarter of 2014, we acquired 100% of the stock of TDX, a data, technology and services company in the United Kingdom that specializes in debt collections and recovery management through the use of analytics, data exchanges and technology platforms. The results of this acquisition have been included in our USIS and International operating segments subsequent to the acquisition. We also purchased Forseva, a provider of end-to-end, cloud-based credit-management software solutions. The results of this acquisition have been included in our USIS operating segment subsequent to the acquisition. For additional information about these acquisitions, see Note 4 of the Notes to Consolidated Financial Statements in this report. |
(4) | During the first quarter of 2013, we divested two non-strategic business lines, Equifax Settlement Services, which was part of our Mortgage business within the USIS operating segment, and Talent Management Services, which was part of our Employer Services business within our Workforce Solutions operating segment, for a total of $47.5 million. We have presented the Equifax Settlement Services and Talent Management Services operations as discontinued operations for all periods presented. For additional information about these divestitures, see Note 3 of the Notes to Consolidated Financial Statements in this report. |
(5) | During the fourth quarter of 2013, the management of BVS, in which we hold a 15% cost method investment, revised its near-term outlook and its operating plans to reflect reduced near-term market expectations for credit information services in Brazil and increased investment needed to achieve its strategic objectives. As a result of these changes, and the associated near-term changes in cash flow expected from the business, we recorded a 40 million Brazilian Reais ($17.0 million) impairment of our original investment of 130 million Brazilian Reais. For additional information, see Note 2 of the Notes to Consolidated Financial Statements in this report. |
(6) | On December 28, 2012, we acquired certain credit services business assets and operations of Computer Sciences Corporation for $1.0 billion. We financed the acquisition with available cash, the issuance of $500 million of 3.30% ten-year senior notes, and commercial paper borrowings under our CP program. The results of this acquisition are included in our USIS segment after the date of acquisition and were not material for 2012. |
(7) | During the fourth quarter of 2012, we offered certain former employees a voluntary lump sum payment option of their pension benefits or a reduced monthly annuity. Approximately 64% of the vested terminated participants elected to receive the lump sum payment which resulted in a payment of $62.6 million from the assets in the pension plan. An amendment to the USRIP was also approved which froze future salary increases for non-grandfathered participants and offered a one-time 9% increase to the service benefit. The settlement and amendment resulted in a $38.7 million pension charge. For additional information, see Note 11 of the Notes to Consolidated Financial Statements in this report. |
(8) | On May 31, 2011, we completed the merger of our Brazilian business with BVS in exchange for a 15% equity interest in BVS, which was accounted for as a sale and was deconsolidated. BVS, an unrelated third-party whose results we do not consolidate, is the second largest consumer and commercial credit information company in Brazil. |
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As used herein, the terms Equifax, the Company, we, our and us refer to Equifax Inc., a Georgia corporation, and its consolidated subsidiaries as a combined entity, except where it is clear that the terms mean only Equifax Inc.
All references to earnings per share data in Management’s Discussion and Analysis, or MD&A, are to diluted earnings per share, or EPS, unless otherwise noted. Diluted EPS is calculated to reflect the potential dilution that would occur if stock options or other contracts to issue common stock were exercised and resulted in additional common shares outstanding.
BUSINESS OVERVIEW
We are a leading global provider of information solutions, employment and income verifications and human resources business process outsourcing services. We leverage some of the largest sources of consumer and commercial data, along with advanced analytics and proprietary technology, to create customized insights which enable our business customers to grow faster, more efficiently and more profitably, and to inform and empower consumers.
Businesses rely on us for consumer and business credit intelligence, credit portfolio management, fraud detection, decisioning technology, marketing tools, and human resources-related services. We also offer a portfolio of products that enable individual consumers to manage their financial affairs and protect their identity. We also provide information, technology and services to support the debt collections and recovery management. Our revenue stream is diversified among businesses across a wide range of industries, international geographies and individual consumers.
Proposed Acquisition of Veda Group Limited
On November 21, 2015, we entered into a Scheme Implementation Deed (the "Agreement") to acquire Veda Group Limited ("Veda") for cash consideration of approximately $1.7 billion (2.4 billion Australian dollars) and debt assumed of approximately $188.4 million (261.5 million Australian dollars). We expect the transaction to close in the first quarter of 2016 and to finance the cash portion of the purchase price through a combination of cash on hand and new debt, including term loans, the 364-day Revolver and commercial paper. The terms of the new debt instruments are included in Note 6 to the Consolidated Financial Statements. The Agreement contains customary representations and warranties of the Company and Veda, as well as customary covenants and agreements, including, among others, covenants providing for Veda and each of its subsidiaries to conduct its business from the date of the Agreement to the closing of the Transaction in the ordinary course. The implementation of this binding agreement is subject to customary closing conditions, as well as shareholder and regulatory approvals in Australia and New Zealand, which have been completed.
Refer to Item 1A "Risk Factors" and Note 16 to the Consolidated Financial Statements for additional information on the proposed acquisition of Veda.
Segment and Geographic Information
Segments. The USIS segment, the largest of our four segments, consists of three product and service lines: Online Information Solutions; Mortgage Solutions; and Financial Marketing Services. Online Information Solutions and Mortgage Solutions revenue is principally transaction-based and is derived from our sales of products such as consumer and commercial credit reporting and scoring, identity management, fraud detection and modeling services. USIS also markets certain decisioning software services, which facilitate and automate a variety of consumer and commercial credit-oriented decisions. Financial Marketing Services revenue is principally project and subscription based and is derived from our sales of batch credit and consumer wealth information such as those that assist clients in acquiring new customers, cross selling to existing customers and managing portfolio risk.
The International segment consists of Canada, Europe and Latin America. Canada’s products and services are similar to our USIS offerings, while Europe and Latin America are made up of varying mixes of product lines that are in our USIS reportable segment. In Europe and Latin America, we also provide information and technology services to support lenders and other creditors in the collections and recovery management process.
In 2015, the personal solutions business in the United Kingdom was consolidated into the North America Personal Solutions segment, which was reorganized into the Personal Solutions segment. Additionally in 2015, the direct to consumer reseller businesses in the U.S., Canada, and the United Kingdom were also consolidated into the Personal Solutions segment. These changes were driven by an enterprise wide strategy to maximize the penetration of our products and services in our
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targeted markets. We determined that market focus and operating efficiency could be further improved by reorganizing and consolidating the United States, Canada and the United Kingdom Personal Solutions and Direct to Consumer Reseller operating activities into one segment, Personal Solutions.
The Workforce Solutions segment consists of the Verification Services and Employer Services business lines. Verification Services revenue is transaction-based and is derived primarily from employment and income verification. Employer Services revenues are derived from our provision of certain human resources business process outsourcing services that include both transaction and subscription based product offerings. These services include unemployment claims management, employment-based tax credit services and other complementary employment-based transaction services, as well as our workforce analytics business including compliance with Affordable Care Act.
Personal Solutions revenue is both transaction and subscription based and is derived from the sale of credit monitoring and identity theft protection products, which we deliver electronically to consumers primarily via the internet in the U.S., Canada, and the U.K. We reach consumers directly and indirectly through partners.
Geographic Information. We currently operate in the following countries: Argentina, Brazil, Canada, Chile, Costa Rica, Ecuador, El Salvador, Honduras, Mexico, Paraguay, Peru, Portugal, the Republic of Ireland, Spain, the U.K., Uruguay, and the U.S. Our operations in the Republic of Ireland focus on data handling, software development and customer support activities. We have an investment in the second largest consumer and commercial credit information company in Brazil and offer consumer credit services in India and Russia through joint ventures. Of the countries we operate in, 77% of our revenue was generated in the U.S. during the twelve months ended December 31, 2015.
Key Performance Indicators. Management focuses on a variety of key indicators to monitor operating and financial performance. These performance indicators include measurements of operating revenue, change in operating revenue, operating income, operating margin, net income, diluted earnings per share, cash provided by operating activities and capital expenditures. Key performance indicators for the twelve months ended December 31, 2015, 2014 and 2013, include the following:
Key Performance Indicators Twelve Months Ended December 31, | |||||||||||
2015 | 2014 | 2013 | |||||||||
(In millions, except per share data) | |||||||||||
Operating revenue | $ | 2,663.6 | $ | 2,436.4 | $ | 2,303.9 | |||||
Operating revenue change | 9 | % | 6 | % | 11 | % | |||||
Operating income | $ | 693.9 | $ | 638.2 | $ | 611.2 | |||||
Operating margin | 26.1 | % | 26.2 | % | 26.5 | % | |||||
Net income attributable to Equifax | $ | 429.1 | $ | 367.4 | $ | 351.8 | |||||
Diluted earnings per share from continuing operations | $ | 3.55 | $ | 2.97 | $ | 2.69 | |||||
Cash provided by operating activities | $ | 742.1 | $ | 616.2 | $ | 569.0 | |||||
Capital expenditures | $ | (150.7 | ) | $ | (86.4 | ) | $ | (83.3 | ) | ||
Business Environment and Company Outlook
Demand for our services tends to be correlated to general levels of economic activity and to consumer credit activity, both enhanced by our own initiatives to expand our products and markets served, and to small commercial credit and marketing activity. In 2016, in the United States, we expect modest growth in overall economic activity and consumer credit. Mortgage market originations are expected to be relatively flat to slightly down for the year. Internationally, the environment continues to be challenging as various countries address their particular political, fiscal and economic issues. In addition, weaker foreign exchange rates, compared to the prior year, will negatively impact both growth in revenue and profit when reported in U.S. dollars.
Over the long term, we expect that our ongoing investments in new product innovation, business execution, enterprise growth initiatives, technology infrastructure, and continuous process improvement will enable us to deliver long-term average organic revenue growth ranging between 6% and 8% with additional growth of 1% to 2% derived from strategic acquisitions
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consistent with our long-term business strategy. We also expect to grow earnings per share at a somewhat faster rate than revenue over time as a result of both operating and financial leverage.
RESULTS OF OPERATIONS —
TWELVE MONTHS ENDED DECEMBER 31, 2015, 2014 AND 2013
Consolidated Financial Results
Operating Revenue from Continuing Operations
Twelve Months Ended December 31, | Change | |||||||||||||||||||||||||
2015 vs. 2014 | 2014 vs. 2013 | |||||||||||||||||||||||||
Operating Revenue | 2015 | 2014 | 2013 | $ | % | $ | % | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||
U.S. Information Solutions | $ | 1,171.3 | $ | 1,079.9 | $ | 1,054.5 | $ | 91.4 | 8 | % | $ | 25.4 | 2 | % | ||||||||||||
International | 568.5 | 572.2 | 497.8 | (3.7 | ) | (1 | )% | 74.4 | 15 | % | ||||||||||||||||
Workforce Solutions | 577.7 | 490.1 | 474.1 | 87.6 | 18 | % | 16.0 | 3 | % | |||||||||||||||||
Personal Solutions | 346.1 | 294.2 | 277.5 | 51.9 | 18 | % | 16.7 | 6 | % | |||||||||||||||||
Consolidated operating revenue | $ | 2,663.6 | $ | 2,436.4 | $ | 2,303.9 | $ | 227.2 | 9 | % | $ | 132.5 | 6 | % | ||||||||||||
Revenue for 2015 increased by 9% compared to 2014. This broad-based growth was organic, and was driven by revenue increases in mortgage, direct to consumer reseller, healthcare, government, and auto verticals. The effect of foreign exchange rates reduced revenue by $75.7 million or 3% in 2015 compared to 2014.
Revenue for 2014 increased by 6% compared to 2013. The growth was driven by the acquisition of TDX in the first quarter of 2014 (“TDX Acquisition”) and the impact of strategic growth initiatives across our businesses. The growth was offset by the expected decline in mortgage market activity. The fourth quarter of 2014 benefited from the relative improvement in mortgage activity in the U.S., which declined in the second half of 2013 through 2014, but at a lesser rate in fourth quarter of 2014. This expected decline reduced reported growth rates in our USIS and Workforce Solutions business units for 2014 as compared to the same period for 2013. The effect of foreign exchange rates reduced revenue by $34.9 million or 1% in the 2014 compared to 2013.
Operating Expenses
Twelve Months Ended December 31, | Change | |||||||||||||||||||||||||
2015 vs. 2014 | 2014 vs. 2013 | |||||||||||||||||||||||||
Operating Expenses | 2015 | 2014 | 2013 | $ | % | $ | % | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||
Consolidated cost of services | $ | 887.4 | $ | 844.7 | $ | 787.3 | $ | 42.7 | 5 | % | $ | 57.4 | 7 | % | ||||||||||||
Consolidated selling, general and administrative expenses | 884.3 | 751.7 | 715.8 | 132.6 | 18 | % | 35.9 | 5 | % | |||||||||||||||||
Consolidated depreciation and amortization expense | 198.0 | 201.8 | 189.6 | (3.8 | ) | (2 | )% | 12.2 | 6 | % | ||||||||||||||||
Consolidated operating expenses | $ | 1,969.7 | $ | 1,798.2 | $ | 1,692.7 | $ | 171.5 | 10 | % | $ | 105.5 | 6 | % | ||||||||||||
Cost of Services. Cost of services increased $42.7 million in 2015 compared to the prior year. The increase in cost of services, when compared to 2014, was due to the increase in production costs driven by higher revenues, as well as increases in people costs, and to a lesser extent an increase in professional services. The effect of changes in foreign exchange rates reduced cost of services by $25.3 million.
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Cost of services increased $57.4 million in 2014 compared to the prior year. The increase in cost of services, when compared to 2013, was due primarily to the acquisition of TDX in the first quarter of 2014 and the 2013 acquisitions. The effect of changes in foreign exchange rates reduced cost of services by $7.7 million.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $132.6 million in 2015 as compared to 2014. The increase was principally due to increases in people costs, and to a lesser extent to increases in marketing expenses, professional fees, as well as litigation expenses. The increase was also due to the costs related to the realignment of internal resources of $20.7 million recorded in the first quarter of 2015. The impact of changes in foreign currency exchange rates decreased our selling, general and administrative expenses by $24.6 million.
Selling, general and administrative expenses increased $35.9 million in 2014 as compared to 2013. The increase was due to the impact of the TDX acquisition in the first quarter of 2014 and the 2013 Acquisitions, an increase in litigation and regulatory compliance expenses, including a third quarter 2014 settlement of a legal dispute over certain software license agreements, and an increase in incentives. These increases were partially offset by decreases in marketing and professional services expenses, as well as smaller decreases in expense in various other categories. The impact of changes in foreign currency exchange rates decreased our selling, general and administrative expenses by $6.8 million.
Depreciation and Amortization. Depreciation and amortization expense for 2015 were slightly lower compared to 2014, due to foreign currency fluctuations of $4.1 million.
The increase in depreciation and amortization expense in 2014, as compared to 2013, was driven by $18.5 million of incremental expense resulting from the TDX Acquisition primarily related to amortization of purchased intangibles. The TDX Acquisition amortization is partially offset by certain purchased intangible assets related to the TALX acquisition in 2007 that became fully amortized during the second quarter of 2013.
Operating Income and Operating Margin
Twelve Months Ended December 31, | Change | |||||||||||||||||||||||||
Operating Income and Operating Margin | 2015 vs. 2014 | 2014 vs. 2013 | ||||||||||||||||||||||||
2015 | 2014 | 2013 | $ | % | $ | % | ||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||
Consolidated operating revenue | $ | 2,663.6 | $ | 2,436.4 | $ | 2,303.9 | $ | 227.2 | 9 | % | $ | 132.5 | 6 | % | ||||||||||||
Consolidated operating expenses | 1,969.7 | 1,798.2 | 1,692.7 | 171.5 | 10 | % | 105.5 | 6 | % | |||||||||||||||||
Consolidated operating income | $ | 693.9 | $ | 638.2 | $ | 611.2 | $ | 55.7 | 9 | % | $ | 27.0 | 4 | % | ||||||||||||
Consolidated operating margin | 26.1 | % | 26.2 | % | 26.5 | % | (0.1)pts | (0.3 | )pts | |||||||||||||||||
Total company margin decreased slightly in 2015 due to the costs for the realignment of internal resources of $20.7 million and other increases in people costs. The decrease was mostly offset by the margin improvements of 290 basis points and 510 basis points in our USIS and Workforce Solutions segments, respectively.
Total company margin decreased slightly in 2014 due to a third quarter 2014 settlement of a legal dispute over certain software license agreements and increased cost of services and acquisition-related amortization expense related to the acquisition of TDX. The decrease was partially offset by a reduction in amortization of certain purchased intangible assets related to our TALX Corporation acquisition in 2007 that became fully amortized during the second quarter of 2013.
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Interest Expense and Other Income (Expense), net
Twelve Months Ended December 31, | Change | |||||||||||||||||||||||||
2015 vs. 2014 | 2014 vs. 2013 | |||||||||||||||||||||||||
Consolidated Interest and Other Income (Expense), net | 2015 | 2014 | 2013 | $ | % | $ | % | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||
Consolidated interest expense | $ | (63.8 | ) | $ | (68.6 | ) | $ | (70.2 | ) | $ | 4.8 | (7 | )% | $ | 1.6 | (2 | )% | |||||||||
Consolidated other income (expense), net | 6.5 | 4.6 | (10.6 | ) | 1.9 | 41 | % | 15.2 | 143 | % | ||||||||||||||||
Average cost of debt | 4.5 | % | 4.3 | % | 4.6 | % | ||||||||||||||||||||
Total consolidated debt, net, at year end | $ | 1,195.2 | $ | 1,526.1 | $ | 1,442.0 | $ | (330.9 | ) | (22 | )% | $ | 84.1 | 6 | % | |||||||||||
Interest expense decreased in 2015, when compared to 2014, due to an overall decrease in our consolidated debt outstanding as of December 31, 2015. Our average cost of debt increased slightly in 2015 compared to the prior year, due to the higher ratio of higher interest debt and the low balance of low rate commercial paper outstanding.
Interest expense decreased slightly in 2014, when compared to 2013, due to the pay-off of our 7.34% Notes and 4.45% Senior Notes during 2014. Our consolidated debt balance increased, as compared to the prior year, as a result of commercial paper issued to fund the majority of the acquisition price of TDX. The decrease in the average cost of debt for 2014 is due to the pay-off of our 7.34% Notes and 4.45% Senior Notes and additional low rate commercial paper outstanding on average, which caused the average cost of debt to decrease as compared to the prior year.
The increase in other income (expense), net, in 2015 is due to the settlement of escrow amounts related to an acquisition from January 2014, and the gain on foreign currency options put in place as an economic hedge of Veda's purchase price, partially offset by impairment of our cost method investment in Brazil in the second quarter of 2015.
The increase in other income (expense), net, in 2014 is due to the impairment of our cost method investment in Brazil recorded in 2013, which did not recur in 2014. Other income (expense), net in 2014 also includes $7.0 million in foreign exchange losses related to dividends declared by our subsidiary in Argentina and losses incurred in repatriating these funds. These losses were partially offset by an increase in our equity in the earnings of our Russian joint venture.
Income Taxes
Twelve Months Ended December 31, | Change | |||||||||||||||||||||||||
2015 vs. 2014 | 2014 vs. 2013 | |||||||||||||||||||||||||
Provision for Income Taxes | 2015 | 2014 | 2013 | $ | % | $ | % | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||
Consolidated provision for income taxes | $ | (201.8 | ) | $ | (200.2 | ) | $ | (188.9 | ) | $ | (1.6 | ) | 1 | % | $ | (11.3 | ) | 6 | % | |||||||
Effective income tax rate | 31.7 | % | 34.9 | % | 35.6 | % | ||||||||||||||||||||
Overall, our effective tax rate was 31.7% for 2015, down from 34.9% for the same period in 2014. The 2015 rate benefited by 2% due to international related items specifically the increased recognition of foreign tax credits and the permanent item associated with the settlement of escrows related to past acquisitions, and 1.4% due to the state law changes.
Overall, our effective tax rate was 34.9% for 2014, down from 35.6% for the same period in 2013. The 2014 rate benefited by 1.1% as compared to the 2013 rate due to the favorable impact of 2014 international, permanent and discrete items. The 2014 effective rate increased by 0.4% as compared to 2013 due to increases in state income tax rates, which became effective or enacted in 2014.
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Net Income
Twelve Months Ended December 31, | Change | |||||||||||||||||||||||||
2015 vs. 2014 | 2014 vs. 2013 | |||||||||||||||||||||||||
Net Income | 2015 | 2014 | 2013 | $ | % | $ | % | |||||||||||||||||||
(In millions, except per share amounts) | ||||||||||||||||||||||||||
Consolidated operating income | $ | 693.9 | $ | 638.2 | $ | 611.2 | $ | 55.7 | 9 | % | $ | 27.0 | 4 | % | ||||||||||||
Consolidated other expense, net | (57.3 | ) | (64.0 | ) | (80.8 | ) | 6.7 | (10 | )% | 16.8 | (21 | )% | ||||||||||||||
Consolidated provision for income taxes | (201.8 | ) | (200.2 | ) | (188.9 | ) | (1.6 | ) | 1 | % | (11.3 | ) | 6 | % | ||||||||||||
Consolidated net income from continuing operations | 434.8 | 374.0 | 341.5 | 60.8 | 16 | % | 32.5 | 10 | % | |||||||||||||||||
Discontinued operations, net of tax | — | — | 18.4 | — | — | % | (18.4 | ) | (100 | )% | ||||||||||||||||
Net income attributable to noncontrolling interests | (5.7 | ) | (6.6 | ) | (8.1 | ) | 0.9 | (14 | )% | 1.5 | (19 | )% | ||||||||||||||
Net income attributable to Equifax | $ | 429.1 | $ | 367.4 | $ | 351.8 | $ | 61.7 | 17 | % | $ | 15.6 | 4 | % | ||||||||||||
Diluted earnings per share | ||||||||||||||||||||||||||
Net income from continuing operations attributable to Equifax | $ | 3.55 | $ | 2.97 | $ | 2.69 | $ | 0.58 | 20 | % | $ | 0.28 | 10 | % | ||||||||||||
Discontinued operations attributable to Equifax | — | — | 0.15 | — | — | % | (0.15 | ) | (100 | )% | ||||||||||||||||
Net income attributable to Equifax | $ | 3.55 | $ | 2.97 | $ | 2.84 | $ | 0.58 | 20 | % | $ | 0.13 | 5 | % | ||||||||||||
Weighted-average shares used in computing diluted earnings per share | 120.9 | 123.5 | 123.7 | |||||||||||||||||||||||
Consolidated net income from continuing operations increased by $60.8 million, or 16%, in 2015 compared to 2014 due to increased operating income in our USIS and Workforce Solutions businesses. This increase was partially offset by declines due to foreign exchange rates that impacted the International operating segment, declines in the Personal Solutions operating segment, as well as increased corporate expenses due significantly to the realignment of our internal resources, and increases in people costs.
Consolidated net income from continuing operations increased by $32.5 million, or 10%, in 2014 compared to 2013 due to increased operating income in our USIS, Workforce Solutions and Personal Solutions operating segments, and a lower effective income tax rate, partially offset by declines in the International operating segment. The increase in net income attributable to Equifax for 2014, as compared to the prior year, was partially offset by the absence of earnings from the discontinued operations, including a gain on the disposition of those operations, which benefited the prior year period.
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Segment Financial Results
U.S. Information Solutions
Twelve Months Ended December 31, | Change | |||||||||||||||||||||||||
U.S. Information Solutions | 2015 vs. 2014 | 2014 vs. 2013 | ||||||||||||||||||||||||
2015 | 2014 | 2013 | $ | % | $ | % | ||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||
Operating revenue: | ||||||||||||||||||||||||||
Online Information Solutions | $ | 842.1 | $ | 779.5 | $ | 743.9 | $ | 62.6 | 8 | % | $ | 35.6 | 5 | % | ||||||||||||
Mortgage Solutions | 124.1 | 105.7 | 114.3 | 18.4 | 17 | % | (8.6 | ) | (8 | )% | ||||||||||||||||
Financial Marketing Services | 205.1 | 194.7 | 196.3 | 10.4 | 5 | % | (1.6 | ) | (1 | )% | ||||||||||||||||
Total operating revenue | $ | 1,171.3 | $ | 1,079.9 | $ | 1,054.5 | $ | 91.4 | 8 | % | $ | 25.4 | 2 | % | ||||||||||||
% of consolidated revenue | 44 | % | 44 | % | 46 | % | ||||||||||||||||||||
Total operating income | $ | 491.2 | $ | 421.0 | $ | 401.3 | $ | 70.2 | 17 | % | $ | 19.7 | 5 | % | ||||||||||||
Operating margin | 41.9 | % | 39.0 | % | 38.1 | % | 2.9 | pts | 0.9pts | |||||||||||||||||
U.S. Information Solutions revenue increased 8% in 2015 as compared to the prior year. USIS realized solid growth from our mortgage business, as well as continued revenue growth in the automotive and financial services verticals.
U.S. Information Solutions revenue increased 2% in 2014 as compared to the prior year. Solid growth from strategic product and market penetration as well as pricing initiatives were partially offset by the expected decline in mortgage market activity compared to the first half of 2013 when mortgage refinancing activity was still high.
Online Information Solutions. Revenue for 2015 increased 8% when compared to the prior year, due to higher average revenue per unit and increased volumes to mortgage resellers, auto, and other resellers. Revenue also benefited from growth in identity and fraud solutions.
Revenue for 2014 increased 5% when compared to the prior year, due to increased volumes in the financial services and auto verticals. These increases were partially offset by lower average unit revenue due to a less favorable mix of business, primarily mortgage resellers. The period also benefited from growth in our identity and fraud solutions business.
Mortgage Solutions. Revenue increased 17% in 2015 when compared to prior year, driven by a strong market for refinancing and purchase activity, as well as growth from other mortgage product offerings.
Revenue decreased 8% in 2014 when compared to prior year due primarily to the expected lower mortgage refinancing activity.
Financial Marketing Services. Revenue increased 5% in 2015 as compared to 2014. The increases were driven by growth in our credit marketing services due to increased demand from financial services customers.
Revenue decreased 1% in 2014 as compared to 2013. The decline was driven by one-time revenue recognized in 2013 related to the collection of amounts billed in 2012 which did not recur in 2014. The decline is partially offset by strong growth in our customer base for our wealth-based consumer information services products.
U.S. Information Solutions Operating Margin. USIS operating margin increased to 41.9% in 2015 as compared to 2014 of 39.0%. Margin expansion resulted from strong revenue growth and product mix. USIS operating margin increased to 39.0% in 2014 as compared to 2013 of 38.1%. Margin expansion resulted from realized synergies related to our CSC Credit Services Acquisition completed at the end of 2012 including certain transitional expenses in 2013 that did not recur in 2014. The increase in margin for 2014 was partially offset by a third quarter 2014 settlement of a legal dispute over certain software license agreements of $7.9 million.
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International
Twelve Months Ended December 31, | Change | |||||||||||||||||||||||||
2015 vs. 2014 | 2014 vs. 2013 | |||||||||||||||||||||||||
International | 2015 | 2014 | 2013 | $ | % | $ | % | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||
Operating revenue: | ||||||||||||||||||||||||||
Europe | $ | 246.5 | $ | 242.4 | $ | 160.2 | $ | 4.1 | 2 | % | $ | 82.2 | 51 | % | ||||||||||||
Latin America | $ | 199.6 | $ | 192.2 | $ | 194.3 | $ | 7.4 | 4 | % | $ | (2.1 | ) | (1 | )% | |||||||||||
Canada | 122.4 | 137.6 | 143.3 | (15.2 | ) | (11 | )% | (5.7 | ) | (4 | )% | |||||||||||||||
Total operating revenue | $ | 568.5 | $ | 572.2 | $ | 497.8 | $ | (3.7 | ) | (1 | )% | $ | 74.4 | 15 | % | |||||||||||
% of consolidated revenue | 21 | % | 23 | % | 22 | % | ||||||||||||||||||||
Total operating income | $ | 113.5 | $ | 121.0 | $ | 145.3 | $ | (7.5 | ) | (6 | )% | $ | (24.3 | ) | (17 | )% | ||||||||||
Operating margin | 20.0 | % | 21.1 | % | 29.2 | % | (1.1)pts | (8.1)pts | ||||||||||||||||||
International revenue decreased by 1% in 2015 as compared to 2014. Local currency international revenue increased by 12% in 2015 as compared to prior year, as a result of growth across many geographies, including solid growth in Argentina and the U.K., compared to prior year. Local currency fluctuations against the U.S. dollar negatively impacted revenue by $70.5 million, or 13%.
International revenue increased by 15% in 2014 as compared to 2013. Local currency international revenue increased by 22% in 2014 as compared to prior year. Local currency revenue grew 17% as a result of our first quarter 2014 acquisition of TDX and our fourth quarter 2013 acquisitions in Paraguay and Mexico. Local currency revenue increased 5% due to organic growth across the geographies, primarily the U.K., Argentina, and Canada. Local currency fluctuations against the U.S. dollar negatively impacted revenue by $35.6 million, or 7%.
Europe. Local currency revenue growth was 12% in 2015 primarily due to increased revenue in the U.K. across most verticals. Local currency fluctuations against the U.S. dollar negatively impacted revenue by $25.8 million, or 10%, for 2015. Reported revenue increased 2% in 2015.
Local currency revenue growth was 44% in 2014 primarily due to the acquisition of TDX in the first quarter of 2014 which represented 39 percentage points of the growth in 2014. The remaining 5 percentage points of the growth were driven by increased revenue in the U.K. across most product segments, despite continued challenging economic conditions. Local currency fluctuations against the U.S. dollar positively impacted revenue by $11.7 million, or 7%, for 2014. Reported revenue increased 51% in 2014.
Latin America. Local currency revenue increased 17% in 2015 driven by core organic growth primarily in Argentina. Local currency fluctuations against the U.S. dollar negatively impacted revenue by $25.5 million, or 13%, in 2015, most notably due to depreciation in the foreign exchange rate of the Argentine peso and the Chilean peso. Reported revenue increased 4% in 2015.
Local currency revenue increased 18% in 2014 driven by growth in Argentina, Peru, Chile, Uruguay and Ecuador. Approximately half of this growth was organic growth in Argentina and other countries, while the other half resulted from the fourth quarter 2013 acquisitions in Paraguay and Mexico. Local currency fluctuations against the U.S. dollar negatively impacted revenue by $37.4 million, or 19%, in 2014, most notably due to depreciation in the foreign exchange rate of the Argentine peso. Reported revenue decreased 1% in 2014.
Canada. Local currency revenue increased 3% in 2015 compared to 2014, primarily due to growth within information and analytical services. Local currency fluctuations against the U.S. dollar negatively impacted revenue by $19.2 million, or 14%, in 2015. Reported revenue decreased 11% in 2015.
Local currency revenue increased 3% in 2014 compared to 2013, primarily due to new customers within marketing and decision solutions, as well as, growth in information services. Local currency fluctuations against the U.S. dollar negatively impacted revenue by $9.9 million, or 7%, in 2014. Reported revenue decreased 4% in 2014.
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International Operating Margin. Operating margin decreased to 20.0% in 2015 as compared to 21.1% in 2014. The decline primarily resulted from geographic and product mix, regionalization efforts, and investments in the U.K. Operating margin decreased in 2014 as compared to 2013 due to recent acquisitions, including increased acquisition-related amortization expense of $23.3 million in 2014, related to the recent acquisitions. The declines in margin were also a result of inflation-driven pressures on margin in Argentina.
Workforce Solutions
Twelve Months Ended December 31, | Change | |||||||||||||||||||||||||
2015 vs. 2014 | 2014 vs. 2013 | |||||||||||||||||||||||||
Workforce Solutions | 2015 | 2014 | 2013 | $ | % | $ | % | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||
Operating Revenue: | ||||||||||||||||||||||||||
Verification Services | $ | 364.4 | $ | 292.6 | $ | 279.3 | $ | 71.8 | 25 | % | $ | 13.3 | 5 | % | ||||||||||||
Employer Services | 213.3 | 197.5 | 194.8 | 15.8 | 8 | % | 2.7 | 1 | % | |||||||||||||||||
Total operating revenue | $ | 577.7 | $ | 490.1 | $ | 474.1 | $ | 87.6 | 18 | % | $ | 16.0 | 3 | % | ||||||||||||
% of consolidated revenue | 22 | % | 20 | % | 21 | % | ||||||||||||||||||||
Total operating income | $ | 218.8 | $ | 160.7 | $ | 142.6 | $ | 58.1 | 36 | % | $ | 18.1 | 13 | % | ||||||||||||
Operating margin | 37.9 | % | 32.8 | % | 30.1 | % | 5.1 | pts | 2.7 | pts | ||||||||||||||||
Verification Services. Revenue increased 25% in 2015 compared to prior year, due to strong growth in mortgage, auto, pre-employment screening and government verticals, and continued addition of new records to The Work Number database.
Revenue increased 5% in 2014 compared to prior year, due to strong growth in non-mortgage verticals, which was partially offset by the expected decline in mortgage-related verification revenue in 2014 driven by the anticipated decline in mortgage market activity in 2014. The revenue growth in non-mortgage verticals was primarily a result of increased revenue mostly related to government, pre-employment and auto segments.
Employer Services. Revenue grew 8% in 2015, as compared to 2014. Revenue growth was due to continued higher employment based tax credit activity due to the delayed approval of the Federal Work Opportunity Tax Credit program for 2014, as well as growth in our employer-based compliance solutions and workforce analytics business.
Revenue grew 1% in 2014, as compared to 2013. Revenue growth was due to growth in our transaction-based services business and workforce analytics business. The growth in 2014 was partially offset by lower unemployment claims activity and a decline in revenue related to the non-renewal of the Federal Work Opportunity Tax Credit program in 2014.
Workforce Solutions Operating Margin. Operating margin increased 510 basis points to 37.9% in 2015 as compared to 32.8% in 2014. Margin expansion in 2015 was driven by product mix, as well as strong revenue growth in 2015. Operating margin for 2014 increased to 32.8% compared to 30.1% in prior year. Margin expansion in 2014 was driven by a higher mix of high margin business compared to 2013, as well as cost management initiatives executed during the year. Margin improvement was also driven by lower acquisition-related amortization due to certain purchased intangible assets related to our TALX Corporation acquisition in 2007 that became fully amortized during the second quarter of 2013.
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Personal Solutions
Twelve Months Ended December 31, | Change | |||||||||||||||||||||||||
Personal Solutions | 2015 vs. 2014 | 2014 vs. 2013 | ||||||||||||||||||||||||
2015 | 2014 | 2013 | $ | % | $ | % | ||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||
Total operating revenue | $ | 346.1 | $ | 294.2 | $ | 277.5 | $ | 51.9 | 18 | % | $ | 16.7 | 6 | % | ||||||||||||
% of consolidated revenue | 13 | % | 12 | % | 12 | % | ||||||||||||||||||||
Total operating income | $ | 95.2 | $ | 93.4 | $ | 79.3 | $ | 1.8 | 2 | % | $ | 14.1 | 18 | % | ||||||||||||
Operating margin | 27.5 | % | 31.8 | % | 28.6 | % | (4.3 | )pts | 3.2 | pts | ||||||||||||||||
Revenue increased 18% for 2015, as compared to prior year. Local currency revenue grew 19% in 2015, principally due to the growth of direct to consumer reseller revenue, and to a lesser extent, due to consumer direct revenue growth in the U.K. and the U.S. Local currency fluctuations against the U.S. dollar negatively impacted revenue by $5.2 million, or 1%, for 2015. Operating margin decreased in 2015 to 27.5% as compared 31.8% in prior year, due to higher technology and marketing expenses.
Revenue increased 6% for 2014, as compared to prior year. Local currency revenue grew 6% principally due to the growth in Canada and the U.K. consumer direct revenue, and to a lesser extent, in the U.S. consumer direct revenue. This growth was partially offset by declines in consumer reseller revenue. Local currency fluctuations against the U.S. dollar positively impacted revenue by $0.7 million, or less than 1%, for 2014. Operating margin increased in 2014 to 31.8% as compared to 28.6% in prior year, as increased salaries, legal expenses and acquisition-related amortization due to the acquisition of TrustedID in the third quarter of 2013 was more than offset by lower marketing expenses.
General Corporate Expense
Twelve Months Ended December 31, | Change | |||||||||||||||||||||||||
2015 vs. 2014 | 2014 vs. 2013 | |||||||||||||||||||||||||
General Corporate Expense | 2015 | 2014 | 2013 | $ | % | $ | % | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||
General corporate expense | $ | 224.8 | $ | 157.9 | $ | 157.3 | $ | 66.9 | 42 | % | $ | 0.6 | — | % | ||||||||||||
Our general corporate expenses are unallocated costs that are incurred at the corporate level and include those expenses impacted by corporate direction, including shared services, administrative, legal, restructuring, and the portion of management incentive compensation determined by total company-wide performance. General corporate expense increased $66.9 million in 2015, of which $20.7 million relates to the realignment of internal resources in the first quarter of 2015, and increases in people costs, and to a lesser extent to increases in professional fees, as well as litigation expenses.
General corporate expense in 2014 was comparable to 2013.
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LIQUIDITY AND FINANCIAL CONDITION
Management assesses liquidity in terms of our ability to generate cash to fund operating, investing and financing activities. We continue to generate substantial cash from operating activities and remain in a strong financial position managing our capital structure to meet short- and long-term objectives including reinvestment in existing businesses and strategic acquisitions.
Sources and Uses of Cash
Funds generated by operating activities and our credit facilities continue to be our most significant sources of liquidity. We expect that funds generated from results of operations will be sufficient to finance our anticipated working capital and other cash requirements (such as capital expenditures, interest payments, debt payments, potential pension funding contributions and dividend payments) for the foreseeable future. In the event that credit market conditions were to deteriorate, we would rely more heavily on borrowings from the Senior Credit Facility, as described below. On November 21, 2015, the Company refinanced the existing unsecured revolving credit facility of $750.0 million set to expire on December 19, 2017, and entered into a new Credit Agreement (the “Senior Credit Facility”). The Senior Credit Facility includes a revolving credit facility of $900.0 million ("Revolver") and a delayed draw term loan of $800.0 million ("Term Loan Facility"), with maturity dates of November 21, 2020 and November 21, 2018, respectively, with an option to extend the maturity of the revolving credit facility by an additional two years. The Senior Credit Facility allows the Company to request incremental loans of up to $300.0 million. Borrowings may be used for general corporate purposes, including working capital, capital expenditures, acquisitions and share repurchase programs. Availability of the Senior Credit Facility for borrowings is reduced by the outstanding face amount of any letters of credit issued under the facility and, pursuant to our existing Board of Directors authorization, by the outstanding principal amount of our commercial paper notes. Additionally, the Company entered into an $800.0 million 364-day revolving credit facility on November 21, 2015 (the “364-Day Revolver” and together with the Revolver and the Term Loan Facility, the “Senior Credit Facilities”). The 364-Day Revolver has a maturity date of November 19, 2016. The commitments under the Term Loan Facility and the 364-Day Revolver will be funded following the shareholder and court approval. Refer to Note 16 for further discussion. The Term Loan Facility and the 364-Day Revolver provide that the Company may, upon notice to the administrative agent, terminate or permanently reduce any class of commitments. Commitments with respect to the 364-Day Revolver will also be reduced on a dollar-for-dollar basis to the extent the Company issues other senior indebtedness. The Company plans to replace some of the Senior Credit Facilities with senior notes in the future.
At December 31, 2015, $852.3 million was available to borrow under our Senior Credit Facility. Our Senior Credit Facility does not include a provision under which lenders could refuse to allow us to borrow under this facility in the event of a material adverse change in our financial condition, as long as we are in compliance with the covenants contained in the lending agreement.
Information about our cash flows, by category, is presented in the Consolidated Statements of Cash Flows. The following table summarizes our cash flows for the twelve months ended December 31, 2015, 2014 and 2013:
Twelve Months Ended December 31, | Change | |||||||||||||||||||
Net cash provided by (used in): | 2015 | 2014 | 2013 | 2015 vs. 2014 | 2014 vs. 2013 | |||||||||||||||
(In millions) | ||||||||||||||||||||
Operating activities | $ | 742.1 | $ | 616.2 | $ | 569.0 | $ | 125.9 | $ | 47.2 | ||||||||||
Investing activities | $ | (147.8 | ) | $ | (429.3 | ) | $ | (136.3 | ) | $ | 281.5 | $ | (293.0 | ) | ||||||
Financing activities | $ | (612.0 | ) | $ | (283.4 | ) | $ | (333.1 | ) | $ | (328.6 | ) | $ | 49.7 | ||||||
Operating Activities
Cash provided by operating activities for 2015 increased by $125.9 million over the prior year, due to $75.6 million growth in Net Income, adjusted for the Brazil impairment, and improvements in working capital, notably an increase in current liabilities related to current payables, incentives and unearned income.
Cash provided by operating activities for 2014 increased by $47.2 million over the prior year. Cash provided from net income, excluding the impact of the 2013 divestitures, the impairment of our cost method investment in 2013, the impact of depreciation and amortization and stock based compensation expense, increased $35.9 million. The remaining increase in cash from operations was driven by changes in net working capital in 2014 as compared to 2013.
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Fund Transfer Limitations. The ability of certain of our subsidiaries and associated companies to transfer funds to us is limited, in some cases, by certain restrictions imposed by foreign governments, such as Argentina; these restrictions do not, individually or in the aggregate, materially limit our ability to service our indebtedness, meet our current obligations or pay dividends. We currently hold $86.8 million of cash in our foreign subsidiaries.
Investing Activities
Twelve Months Ended December 31, | Change | |||||||||||||||||||
Net cash used in: | 2015 | 2014 | 2013 | 2015 vs. 2014 | 2014 vs. 2013 | |||||||||||||||
(In millions) | ||||||||||||||||||||
Capital expenditures | $ | (146.2 | ) | $ | (86.4 | ) | $ | (83.3 | ) | $ | (59.8 | ) | $ | (3.1 | ) | |||||
Our capital expenditures are used for developing, enhancing and deploying new and existing software in support of our expanding product set, replacing or adding equipment, updating systems for regulatory compliance, licensing of standard software applications, investing in system reliability, security and disaster recovery enhancements, and updating or expanding our office facilities.
Capital expenditures in 2015 increased from 2014, as we are continuing to invest in new products and technology infrastructure. Capital expenditures in 2014 were comparable to 2013.
Acquisitions, Divestitures and Investments
Twelve Months Ended December 31, | Change | |||||||||||||||||||
Net cash provided by (used in): | 2015 | 2014 | 2013 | 2015 vs. 2014 | 2014 vs. 2013 | |||||||||||||||
(In millions) | ||||||||||||||||||||
Acquisitions, net of cash acquired | $ | (4.4 | ) | $ | (341.0 | ) | $ | (91.4 | ) | $ | 336.6 | $ | (249.6 | ) | ||||||
Cash received from divestitures | $ | 2.9 | $ | 0.6 | $ | 47.5 | $ | 2.3 | $ | (46.9 | ) | |||||||||
Investment in unconsolidated affiliates, net | $ | (0.1 | ) | $ | (2.5 | ) | $ | (9.1 | ) | $ | 2.4 | $ | 6.6 | |||||||
2015 Acquisitions and Investments. During the first quarter of 2015, we acquired a 75% equity interest investment in a debt collections and recovery management venture in the U.K., as more fully described in Note 1. During the third quarter of 2015, we received $2.9 million proceeds from the escrow related to a past disposition. We did not make significant investments in unconsolidated affiliates during 2015.
2014 Acquisitions and Investments. During the first quarter of 2014, we acquired TDX, included as part of our International operating segment, and Forseva, included as part of our USIS operating segment. During the first quarter of 2013, we divested two non-strategic business lines, Equifax Settlement Services which was part of our Mortgage business within the USIS operating segment and Talent Management Services which was part of our Employer Services business within our Workforce Solutions operating segment, for a total of $47.5 million. $3.5 million of the proceeds of the sale of Talent Management Services was placed into an escrow account to be released to us at a later date. During 2014, we received $0.6 million of the proceeds from the escrow.
We invested $2.5 million in our joint venture in India during 2014. This investment was more than offset by dividends received from our joint venture in Russia.
2013 Acquisitions and Investments. During the third quarter of 2013, we acquired TrustedID, a direct-to-consumer identity protection business that is included as part of our Personal Solutions business unit. During the fourth quarter of 2013, we completed two acquisitions in Paraguay and Mexico in the Latin America region of our International segment.
In the first quarter of 2013, we divested of two non-strategic business lines, as discussed above, for a total of $47.5 million. $3.5 million of the proceeds of the sale of Talent Management Services was placed into an escrow account and was released to us in 2015 and 2014. We also divested of three other small non-strategic operations.
We invested $8.0 million in our joint ventures in 2013 to increase our percentage ownership interest in Russia, and as a general capital call in India, as well as $1.1 million in another international entity.
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For additional information about our acquisitions, see Note 4 of the Notes to Consolidated Financial Statements in this report.
Financing Activities
Twelve Months Ended December 31, | Change | |||||||||||||||||||
Net cash provided by (used in): | 2015 | 2014 | 2013 | |||||||||||||||||